What is the classification of NPA in banks?

Question

Accepted Answer

NPA in banks are classified into three categories based on the period of non-payment.

NPA stands for Non-Performing Asset.
The classification of NPA is based on the period of non-payment - sub-standard, doubtful, and loss.
Sub-standard assets are those which have remained NPA for a period less than or equal to 12 months.
Doubtful assets are those which have remained in the sub-standard category for a period of 12 months.
Loss assets are those where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly.
The classification of NPA is important for banks as it helps them to identify the risk associated with lending to a particular borrower.

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