What is NPA? How NPA can be reduced?


Posted On: Mar 18, 2020


Expanded as Non-Performing Asset, an NPA is a type of loan or advances that are in default or in arrears. These loans are classified as NPA when principal or interest payments are late or missed. They are listed on the balance sheets of a bank and a significant number of NPAs indicate that the financial health of the bank is not good. Some of the ways to reduce NPA are,

Lok Adalats

Small loans can be recovered using the guidelines in the Lok Adalats issued by the RBI in 2001.

Compromise Settlement

With this non-discretionary mechanism, NPAs up to 10 crores can be recovered.

Credit Information Bureau

Here, the Credit Information Bureau (CIB) helps the bank with the financial data about the individual defaulters to help the bank to reduce NPA.


This act helps the bank to deal with NPA using three alternatives such as Asset Reconstruction, Enforcement of Security, and Securitisation.

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