Our Recommendations :-
Follow CA Final FB Page

What is the difference between gross NPA and net NPA?

Open uri20170510 32134 7ezpi6?1494421819 jaggu asked about 3 years ago

What is the difference between gross NPA and net NPA?

    0       0 Answer Now Comment Report
4 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered almost 3 years ago

Gross NPA is the amount outstanding in the borrowal account, in books of the bank other than the interest which has been recorded and not debited to the borrowal account. Net NPAs is the amount of grosss NPAs less (1) interest debited to borrowal and not recovered and not recognized as income and kept in interest suspense (2) amount of provisions held in respect of NPAs and (3) amount of claim received and not appropriated.

    0       0 Comment Report
Important Note – Preparing for CA Final?
CAKART provides Indias top faculty each subject video classes and lectures – online & in Pen Drive/ DVD – at very cost effective rates. Get video classes from CAKART.in. Quality is much better than local tuition, so results are much better.
Watch Sample Video Now by clicking on the link(s) below – 
For any questions Request A Call Back  
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered about 3 years ago

Gross NPA: It is the total number of NPAs of the bank simply added. Banks would continuously assess this by evaluating their loan payments and decide the NPAs. What you need to understand here is when the NPA occurs , it is not just an interest income loss to the bank, but a principal loss as well. That means, if a bank has lent 100 Crore to a company with an outstanding loan amount of 60 Crores,then the bank would lose these 60 Crores along with the future interest payments as well- when the company goes bust. Now this is a serious loss to the bank and someone has to bear that loss. If the loss is much higher and there is every possibility that the customer's deposits may get eroded. This is where the risk management and regulators come into picture. Knowing that the banks would take extra risk in giving the loans, the regulators decided to put a condition known as provision for bad assets.

    0       0 Comment Report
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered about 3 years ago

DIFFERENCE BETWEEN GROSS NPA AND NET NPA Gross NPA is the amount outstanding in the borrowal account, in books of the bank other than the interest which has been recorded and not debited to the borrowal account. Net NPAs is the amount of grosss NPAs less (1) interest debited to borrowal and not recovered and not recognized as income and kept in interest suspense (2) amount of provisions held in respect of NPAs and (3) amount of claim received and not appropriated. The Reserve Bank of India defines Net NPA as Net NPA = Gross NPA – (Balance in Interest Suspense account + DICGC/ECGC claims received and held pending adjustment + Part payment received and kept in suspense account + Total provisions held). The Reserve Bank of India Banks has advised the banks to compute their Gross Advances, Net Advances, Gross NPAs and Net NPAs as per the following format w.e.f. September 2009. Thanks

    0       0 Comment Report
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 AZim Hussain Sikder answered about 3 years ago

Gross NPA: It is the total number of NPAs of the bank simply added. Banks would continuously assess this by evaluating their loan payments and decide the NPAs. What you need to understand here is when the NPA occurs , it is not just an interest income loss to the bank, but a principal loss as well. That means, if a bank has lent 100 Crore to a company with an outstanding loan amount of 60 Crores,then the bank would lose these 60 Crores along with the future interest payments as well- when the company goes bust. Now this is a serious loss to the bank and someone has to bear that loss. If the loss is much higher and there is every possibility that the customer's deposits may get eroded. This is where the risk management and regulators come into picture. Knowing that the banks would take extra risk in giving the loans, the regulators decided to put a condition known as provision for bad assets. To elaborate, banks need to continuosly assess their loans and set aside an amount in the beginning itself to accommodate for any losses. It means that for a total loan base of say 500 Crores, depending on the interest payments nature, banks are required to keep a provision aside, let us say 50 Crores. In simple terms, it means that the bank has alrady kept aside 50 Crores for bad assets and has the money to bear that loss. Net NPA: Net NPA is simply the total bad assets (actual) minus the provision left aside. Let us study a few examples. Scenario 1 :Gross NPA : 100 Crores ; Provision Aside : 10 Crores ; At the end of the year, the bank manages to collect 85 Crores only. Now actual NPA is 15 Crores - Provision is 10 Crores = Net NPA = 5 Crores Scenario 2: If the bank manages to collect 95 Crores. Then Net NPA = 5-10 = -5 Crores. Generic Conclusions: In an ideal and healthy scenario, the Net NPA mean of the all the banks should be close to zero. If an individual bank has Net NPA in negative, then that is a good sign. In practise you would see the Net NPA or Gross NPA as a percentage. Usually it is calculated on the total lending done for that year.

    0       0 Comment Report
Get Notifications
Videos
Books
Notes
Loading
SIGN UP
Watch best faculty demo video classes

These top faculty video lectures will
help u prepare like nothing else can.