WHAT?

Gross Non-Performing Assets (Gross NPA) and Net Non-Performing Assets (Net NPA) are key indicators of the health of a bank's loan portfolio in India, reflecting the level of bad loans or assets that have stopped generating income.

Gross NPA

Banks extend loans to the borrowers and since these loans earns interest for the banks, they are considered Bank Assets. Banks expect a return on these assets like interest income. But if the borrower doesnt pay it's due principal or interest or both on the loans taken for more than 90 days from the due date, it is classified as Non Performing Asset of NPA or Gross NPA or GNPA. 

Gross NPA represents the total value of loans and advances where the borrower has failed to make interest or principal payments for 90 days or more, as per Reserve Bank of India (RBI) guidelines. It includes all outstanding amounts without accounting for provisions or write-offs. Example: If a bank has ₹100 crore in loans where payments are overdue by 90+ days, the Gross NPA is ₹100 crore.

Net NPA

RBI requires that the banks should have extra capital managed separately to cover the possible losses due to the GNPA. This process is called Provisioning. Click here to know more on Provisioning. Provisioning is about making arrangements to cover to provide cushion for the bad days. Banks need to cushion their loans which may have turned into Non Performing Assets.

Net NPA is the amount of Gross NPA after deducting provisions made by the bank for bad loans. Therefore Net NPA = Gross NPA - (Provisions for NPAs). Example: If the Gross NPA is ₹100 crore and provision amount is 40 crores, the Net NPA is ₹60 crore.

NNPA Provides a clearer picture of the bank’s financial health by showing the net loss potential after mitigating measures. Higher Gross NPA signals greater credit risk, while a lower Net NPA indicates better provisioning and resilience. RBI monitors both, but Net NPA is critical for assessing capital adequacy and profitability.