N P As : Definition An asset, including a leased asset, becomes nonperforming when it ceases to generate income for the bank.

A credit facility in respect of which the interest or installment of principal has remained past due for a specified time.

In accounting, originally Bad & Doubtful Debts

In 1980s, RBI followed 8 point Health Code Also called Non Performing Loans (NPLs) or Stressed Assets

An advance where interest and / or installment of principal remain overdue for a period of more than 90 days in respect of Term Loan / OD / CC / BP / BD / other accounts investments, export finance , agricultural , housing loan, educational loan, lease and hire purchase . Etc.

IDENTIFICATION OF NPA *Outstanding Balance remains continuously in excess of sanction limit/drawing power for 90 days or more.

*No credit continuously for 90 days or more as on the date of Balance Sheet.
*Credits in the account are not sufficient to cover interest debited during the same period.

RBI on NPA Non-performing asset means an asset or account of borrower, which has been classified by bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the direction or guidelines relating to assets classification issued by RBI.

Action for enforcement of security interest can be initiated only if the secured asset is classified as Non-performing asset.

Types of NPA A] Gross NPA:Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI guidelines as on Balance Sheet date. Gross NPA reflects the quality of the loans made by banks.

Gross NPA Ratio = Gross NPA/ Gross Advances

B] Net NPA:-Net NPAs are those type of NPAs in which the bank has deducted the provision regarding NPAs. Net NPA shows the actual burden of banks. Net NPA Ratio = Gross NPA Provisions / Gross Advances - Provisions

PROBLEMS DUE TO NPA

Owners do not receive a market return on their capital in the worst case, if the banks fails, owners lose their assets. In modern times this may affect a broad pool of shareholders. Depositors do not receive a market return on saving. Banks redistribute losses to other borrowers by charging higher interest rates, lower deposit rates and higher lending rates repress saving and financial market, which hamper economic growth

IMPACT OF NPA
Profitability:NPA means booking of money in terms of bad asset, which occurred due to wrong choice of client. Because of the money getting blocked the prodigality of bank decreases not only by the amount of NPA but NPA lead to opportunity cost also as that much of profit invested in some return earning project/asset.

Liquidity:Money is getting blocked, decreased profit lead to lack of enough cash at hand which lead to borrowing money for short period of time which lead to additional cost to the company

Credit loss:Bank is facing problem of NPA then it adversely affect the value of bank in terms of market credit.

CONCLUSION
A The only problem that the Industrial Development Bank of India is facing today is the problem of nonperforming assets. The non performing assets means those assets which are classified as bad assets which are not possibly be returned back to the banks by the borrowers. If the proper management of the NPAs is not undertaken it would hamper the business of the banks. The NPAs would destroy the current profit, interest income due to large provisions of the NPAs, and would affect the smooth functioning of the recycling of the funds.