Source: IE
Context:
Kolkata-headquartered Bandhan Bank has announced plans to sell unsecured retail non-performing assets (NPAs), including written-off accounts, worth ₹6,931.31 crore to Asset Reconstruction Companies (ARCs) and other permitted entities. This marks one of the largest retail NPA sales by a private sector bank in India, primarily from its microfinance portfolio.
What is an NPA (Non-Performing Asset)?
A Non-Performing Asset (NPA) is a loan or advance where the borrower has stopped making scheduled payments (principal or interest) for a certain period.
As per RBI norms:
When does a loan become NPA?
A loan is classified as NPA after 90 days of overdue in the case of:
- Term loans
- Cash credit/overdraft accounts that remain out of order
- Bills purchased and discounted
- Agricultural loans (with seasonal norms)
Categories of NPAs
- Sub-standard Asset: NPA for ≤ 12 months
- Doubtful Asset: NPA for > 12 months
- Loss Asset: Identified as uncollectable (but not fully written off)
In simple words:
If a borrower does not pay for 90 days, the bank stops recognising income from that loan and marks it as NPA.
Norms to Sell NPAs (As per RBI Guidelines)
Banks can sell NPAs to:
- Asset Reconstruction Companies (ARCs),
- Other Banks,
- NBFCs,
- Financial Institutions,
as permitted by RBI.
Eligibility for Sale
- Only stressed assets classified as NPA or
- Standard assets under stress (SMA accounts)
can be sold. - Written-off accounts can also be sold.
