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Non-Performing Assets have been the reason for major crisis around the world, for instance, the Greek economic crisis in 2015. One of the main reasons why countries like Greece, Italy, Portugal, Ireland, Russia and India have fallen in the trap of NPAs is because of the country’s policy to infuse capital in the economy without being backed by reforms which promote savings and ensure that lenders don’t suffer.
A non-performing asset is a loan provided by financial institutions that is in default or in arrears on scheduled payments of principal or interest. Such debt is classified as non-performing when loan payments have not been made for a period of 90 or more days. On April 18, 2017, RBI issued a circular requiring bank to disclose the divergence in NPA in the ‘Notes to Accounts’ to the financial statements. According to RBI rules, if the divergence between its assessment of bad debt and a banks declared bad debt is more than 15 per cent, the bank will have to report the divergence in its next quarterly report.