NPA Essay: NPA stands for Non-Performing Assets. Categorization of loans or advances that are in default or arrears is known as non-performing assets. When the borrower misses the principal or pays the interest payments lately, then the loan belongs to arrear.
And, when the lender considers the agreement of loan to be broken or when the debtor is incapable of meeting his obligations, then the loan is in default. Non-performing assets is a very important term in the banking system.
You can also find more Essay Writing articles on events, persons, sports, technology and many more.
Long and Short Essays on NPA for Students and Kids in English
We are providing students with samples of essay on a long essay of 500 words and a short essay of 150 words on the topic NPA for reference.
Long Essay on NPA 500 Words in English
Long Essay on NPA is usually given to classes 7, 8, 9, and 10.
NPA is the abbreviated form of Non-Performing Assets. NPA is a very well known term in commercial fields. The lists of non-performing assets are found on a bank or any other financial institution’s balance sheet.
A lender always makes an agreement of debt with a borrower. When the borrower doesn’t return the money with interest after a long period, then the lender forces the borrower to liquidate any assets that were pledged as part of the agreement of debt. The lender then can write-off that asset as a bad debt and then sell it to a collection agency at a discount.
In most of the cases, when any loan payment is not made for 90 days, then the debt is classified as non-performing. Ninety days is a standard period, whereas, the elapsed time amount may vary depending on the terms and conditions of the loan of each individual. At any point during the time of maturity of the loan, it can be classified as a non-performing asset.
An example will make the concept of non-performing assets clear. Let us assume, a company with a loan of INR 1 crore with interests of INR 50 thousand per month, fails to pay for three consecutive months. The lender, i.e., the person or any bank or company who lent that company can categorize the loan as non-performing to meet the regulatory requirements. The lender can also categorize the loan as non-performing if the company pays all the interests but fails to return the principal at maturity.
Carrying non-performing assets are also referred to as non-performing loans. On the balance sheet, the non-performing loans put extra pressure on the lender. If the interest or principal is not paid, then the cash flow of the lender will reduce significantly. Reduction of the cash flow will cause disruption in budget and thus decrease in earnings.
There are different types of non-performing assets. The most common type of non-performing assets is term loans. Though, there are few other types of NPA as well. “Overdraft and cash credit accounts” is a type of NPA that is left out-of-order for more than three months. Regular payment is overdue for more than three months on any other type of account.
There is a process of recording the non-performing assets. Banks classify the non-performing assets into three categories according to the duration of the assets’ non-performance. These three categories are sub-standard assets, doubtful assets and loss assets.
As an asset that has been non-performing for less than a year is classified as a sub-standard asset. An asset that has been in a state of non-performing for more than a year is classified as a doubtful asset. And, loans with losses that are identified by the auditor, bank or inspector that need to be fully written-off are called loss assets.
Lenders face minimal and sometimes huge losses due to non-performing assets. They have just four options to cover up all the losses or some of the losses. The lenders may take pro-active steps when companies struggle to return their debt, to reconstruct the loans to keep the maintenance of cash flow. In this way, they can avoid the classification of loans as non-performing assets altogether.
Short Essay on NPA 150 Words in English
Short Essay on NPA is usually given to classes 1, 2, 3, 4, 5, and 6.
NPA is the abbreviated form of Non-Performing Assets. NPA is a very well known term in commercial fields. The lists of non-performing assets are found on a bank or any other financial institution’s balance sheet. When the borrower misses or pays the interest payments lately, then the loan belongs to arrear.
In most of the cases, when any loan payment is not made for 90 days, then the debt is classified as non-performing. Ninety days is a standard period, whereas, the elapsed time amount may vary depending on the terms and conditions of the loan of each individual. At any point during the time of maturity of the loan, it can be classified as a non-performing asset.
There are different types of non-performing assets. The most common type of non-performing assets is term loans. Though, there are few other types of NPA as well. “Overdraft and cash credit accounts” is a type of NPA that is left out-of-order for more than three months. Regular payment is overdue for more than three months on any other type of account.
10 Lines on NPA in English
- NPA is the abbreviated form of Non-Performing Assets.
- When any loan payment is not made for 90 days, then the debt is classified as non-performing.
- The lender then can write-off that asset as a bad debt and then sell it to a collection agency at a discount.
- The lender can categorize the loan as non-performing if the company pays all the interests but fails to return the principal at maturity.
- Carrying non-performing assets are also referred to as non-performing loans.
- The most common type of non-performing assets is term loans.
- Three categories of NPA are sub-standard assets, doubtful assets and loss assets.
- A non-performing asset for less than a year is classified as a sub-standard asset.
- A non-performing asset for more than a year is classified as a doubtful asset.
- Lenders have just four options to cover up all the losses or some of the losses.
FAQ’s on NPA Essay
Question 1.
What is the full form of NPA?
Answer:
The full form of NPA is Non-Performing Assets.
Question 2.
How many categories of NPA are there?
Answer:
There are three categories of NPA.
Question 3.
What is a sub-standard asset?
Answer:
An essay that has been non-performing for less than a year is called a sub-standard asset.