NPAs - Write offs - Waive Offs - Can India bank on its banks?
One of my friends highlighted recent RTI information from RBI about NPAs and write-offs citing an article from Indian Express. Before going into the details mentioned in the article, let me go through the technical terms like Stressed assets, NPA, provisions for bad debts, Write-off, Waive-off, and ARC (Asset Reconstruction Company). Stressed assets - A loan is an asset for the bank since it earns interest on loans. A stressed asset in banking terminology is any loan that has become an NPA and undergoing a legal process for recovery. So, what is NPA? NPA - NPA is an acronym for Non-Performing Asset. A loan is termed as NPA when the repayment of principal or interest is not made as per the schedule for more than 90 days. Every loan given by a bank will have a certain risk of default. Banks will assess such risk at the time of disbursement of loan and such risk is actually covered by provisioning for bad debts at the end of every financial year. So, what is this provisioning for bad debt