Understanding GNPA and NNPA

I really enjoyed the Banking sector story and the awards feature in the last magazine issue. I’m new to the markets, and this might sound like a basic question, but could you please explain what GNPA and NNPA mean, which you mentioned among the qualities of the winners? - Shalmali Kokate [EasyDNNnews:PaidContentStart]

Editor Responds: Thank you for your question. GNPA (Gross NonPerforming Assets) and NNPA (Net Non-Performing Assets) are key indicators of a bank’s asset quality. GNPA represents the total value of loans that have stopped generating income for the bank, typically when borrowers fail to make payments for 90 days or more. It shows the overall level of stress in the bank’s loan book. NNPA, on the other hand, is derived after deducting provisions made for bad loans from GNPA, reflecting the actual loss the bank may face. Lower GNPA and NNPA ratios indicate better credit management and financial health. Banks with improving NPAs demonstrate strong risk control and efficient recovery mechanisms, making them more attractive to investors and deserving of recognition in awards.

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