When a principal or interest is overdue for 90 days, it is called a non-performing asset or NPA. It is essential to know what happens after NPA. I will provide insights into what happens if an account becomes NPA.What happens after NPA?
If you fail to repay the loan the bank can seize the mortgaged assets and sell them. There might be some complications in this process as the asset you provide has to be sold at a discount and not at the original price.
Banks can transfer the loan into equity that is bringing new promoters or management by displacing the old ones. This process is also called Strategic Debt Restructuring (SDR) scheme by RBI.
The bank can help out the borrowers by restructuring the loan. The bank can extend the time of payment or waive some amount of loan or decrease the interest rate, or combine these processes.
You can sell your NPA to the Asset Reconstruction Company(ARC). The Asset Reconstruction Company procures the bad loans or non-performing assets that commercial or other banks issue. Banks can receive a heavy loss in this process. But as 100% of the loan exits the balance sheet it can be considered a good option.
Hope you have learned about what happens after NPA.
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What happens if an account becomes NPA ?
Geetika Gumbar
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September 21, 2021
2021-09-21T18:29:10+00:00 2021-09-21T18:58:27+00:00Comment
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Banking
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