Economics • Banking & FinanceEasy
What is meant by 'Non-Performing Asset (NPA)' in the Indian banking system?
A. Loans where interest and/or installment of principal remain overdue for a period of more than 90 days✓ Correct Answer
B. Foreign exchange reserves held by banks that fail to generate interest income
C. Bonds issued by bankrupt corporations held in bank investment portfolios
D. Dormant savings bank accounts with zero balances for over a year
💡 Solution & Explanation
A non-performing asset is defined by banking regulators as a loan or advance where interest or principal installments remain overdue for a period exceeding ninety days. This classification signals credit risk and potential default, requiring banks to set aside provisions against potential losses. Banking sector health indicators like gross and net NPAs are standard economic concepts for competitive exams.
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