Loan and NPA Management

A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower. Non-performing assets, also called non-performing loans, are loans, made by a bank or finance company, on which repayments or interest payments are not being made on time. The most calamitous problem facing banks all over the world in recent times is spiraling non performing asset (NPA). Which are affecting their viability and solvency and thus posing challenge to their ultimate survival. NPA adversely affect lending activity of banks as non recovery of loan installment as also interest on the loan portfolio negates the effectiveness of credit – dispensation process. Non recovery of loan also hurt the profitability of banks, besides banks with high level of NPA have to carry reserves and provision and to provide cushion for loan losses. Banks have to make provisions on NPA from out of income learned by them on performing asset. In present paper author is suggesting possible way to reducing NPA.