Non-performing assets (NPA) are loans or advances that have stopped generating income for the bank or financial institution because the borrower has failed to repay the principal and interest for a specified period of time. In other words, an NPA is a loan that is not being serviced by the borrower as per the agreed upon repayment schedule.
NPAs are considered a major problem for banks and financial institutions because they can negatively impact their profitability and financial health. When a loan becomes an NPA, the bank or financial institution has to set aside more provisions against the loan, which can lower their profits and capital adequacy ratios.
