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Securitization Act 2002


What is a NPA (non performing asset)

Action for enforcement of security interest can be initiated only if the secured asset is classified as Non Performing Asset.

Non Performing Asset means an asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions or guidelines relating to asset classification issued by RBI.

An amount due under any credit facility is treated as "past due" when it has not been paid within 30 days from the due date. Due to the improvement in the payment and settlement systems, recovery climate, upgradation of technology in the banking system, etc., it was decided to dispense with 'past due' concept, with effect from March 31, 2001. Accordingly, as from that date, a Non performing asset (NPA) shell be an advance where

  1. interest and /or installment of principal remain overdue for a period of more than 180 days in respect of a Term Loan,

  2. the account remains 'out of order' for a period of more than 180 days, in respect of an overdraft/ cash Credit(OD/CC),

  3. the bill remains overdue for a period of more than 180 days in the case of bills purchased and discounted,

  4. interest and/ or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purpose, and

  5. any amount to be received remains overdue for a period of more than 180 days in respect of other accounts.

With a view to moving towards international best practices and to ensure greater transparency, it has been decided to adopt the '90 days overdue' norm for identification of NPAs, form the year ending March 31, 2004. Accordingly, with effect form March 31, 2004, a non-performing asset (NPA) shell be a loan or an advance where;

  1. interest and /or installment of principal remain overdue for a period of more than 90 days in respect of a Term Loan,

  2. the account remains 'out of order' for a period of more than 90 days, inrespect of an overdraft/ cash Credit(OD/CC),

  3. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,

  4. interest and/ or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purpose, and

  5. any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.



Securitization Act 2002 Back




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