Many large corporations, such as General Motors, have written off large amounts of their nonperforming (or poorly performing) assets as they have shrunk their operations. What is the impact of these...

Nonperforming assets :
Nonperforming assets :
A Non-performing asset (NPA) is defined as a credit facility in respect of which the interest and/or installment of Bond finance principal has remained ‘past due’ for a specified period of time. NPA is used by financial institutions that refer to loans that are in jeopardy of default. Once the borrower has failed to make interest or principle payments for 90 days the loan is considered to be a non-performing asset. Non-performing assets are problematic for financial institutions since they depend on interest payments for income. Troublesome pressure from the economy can lead to a sharp increase in non-performing loans and often results in massive write-downs.
With a view to moving towards international best practices and to ensure greater transparency, it had been decided to adopt the ‘90 days’ overdue’ norm for identification of NPA, from the year ending March 31, 2004. Accordingly, with effect from March 31, 2004, a non-performing asset (NPA)is a loan or an advance where;
·         Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan,
·         The account remains ‘out of order’ for a period of more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC),
·         The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,
·         Interest and/or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and
·         Any amount to be received remains overdue for a period of more than 90 days...