Context:
Finance Minister urged public sector banks to ensure the fair and transparent identification of non-performing assets (NPAs).
About Non-Performing Assets:
- Refers to loans and arrears provided by banks or financial institutions where the repayment of principal and interest is delayed for a period exceeding 90 days.
- Commercial loans that are over 90 days past due and consumer loans that are over 180 days past due are commonly categorized as nonperforming assets by banks.
- Classification of NPAs –
- Standard assets: NPAs aged from 90 days to 12 months
- Sub-standard assets: NPAs aged up to 12 months.
- Doubtful assets: NPAs aged over 12 months.
- Loss assets: Identified losses not yet written off by the bank or its auditors.
About National Asset Reconstruction Company Limited (NARCL):
- A government entity established in 2021.
- Aim – To create a bad bank containing an asset reconstruction company (ARC) and an asset management company (AMC) to manage and recover dud assets.
- Stakeholders: Public and Private Sector Banks
- Sponsor Bank: Canara Bank
- Registered with RBI under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
A ‘bad bank’ is a financial entity set up to acquire NPAs from banks and resolve them which has been tried out in countries such as the U.S., Germany, Japan etc.
Source: The Hindu
Non-performing assets (NPAs) decline in value when
- Demand revives in the economy.
- Capacity utilization increases.
- Capacity utilization, though substantive, is yet sub-optimal.
- Capacity utilization decreases consequent upon merger of units.
Which of the above statements are correct?
[UPSC Civil Service Exam – Prelims – 2018]
a) 1, 3 and 4 only
b) 1, 2 and 4 only
c) 1, 2 and 3 only
d) 1, 2, 3 and 4
