What is a NPA ‘Non-performing Promissory Note"

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When a mortgagor has not keep the payment potential, when the debtor has not made the scheduled payments for at least 90 days, the note is non-performing; it is in default or close to being in default. Once a loan is NPA (non-performing), the odds it will be repaid in full are substantially lower. If the debtor makes payments again, on a non performing loan, it becomes a "re-performing loan", even if the borrower has not caught up on all the wasted payments.

Land, labor, capital, organization, science and technology are known as the factors of production. Their availability is variable from country to country. In some countries their cost is lower and in others they are expensive. Their supply depends upon several factors. Hence, the governments do offer several subsidies and incentives to encourage production. Thus, the cost of production is variable from country to country. There are several types of incentives being offered to the entrepreneurs. Similar to the non-performing students and governments, there are NPA (non-performing assets) too. Such assets do not yield the expected income to the bankers.

An enthusiastic entrepreneur was in search of all the factors of production. He is talented but he was in need of capital. He approached a bank for capital. Due to his assurances, the bank could lend him the amount demanded by him. He started an educational institution in the sub urban area of a metropolitan city. Due to heavy competition among the capitalists, his business did not succeed. In other words, whatever he expected from the business did not yield the results. Hence, he could not repay the loan borrowed from the bank! The bank declared the asset as a NPA (non performing asset).

In another incident, an entrepreneur did ****yses the market conditions very well and borrowed huge amounts of loan from a nationalized bank. He did utilize some political influence too to get the loan from the bank. He bought all the factors of production. He did invest a part of his borrowed loan on research and development too. His intention was to produce export quality engineering goods. But there has been a heavy competition in the international market! In other words, his firm's production cost was higher than that of the remaining international producers. Adding fuel to the problem, the government’s policies related to international trade too were discouraging. Thus his company's produced goods total cost was very high when compared to the other exporters. Hence, he could not repay the loan borrowed from the bank and as usual the bank declared his assets as NPA (non-performing assets).

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