Overdue Loans and NPA
Banks expectthat all the borrowers, who fake the loans, are prompt in payment of interest and repayment of principal amount. However, it is possible that on account of a number of reasons, the interest and principal may become defaulted or overdue. Thus, some portion of loans may turn into ‘non-performing assets’ (NPAs), which causes loss of income (interest not being paid or recovered) and in some cases loss of the amount lent. Lending, therefore, calls for good credit appraisal and requires adequate care, caution and supervision/monitoring, by the bank, to prevent loans turning overdue (past dues) and eventually into NPAs. Collection or recovery of dues/overdues is important for the sustainability of banks.
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