Gross Non Performing Asset

GROSS non-performing assets (GNPA) of the country’s scheduled commercial banks, which declined to a 10-year low in March 2023

What is Gross Non-Performing Assets (GNPA)?

  • Gross NPA is the term used by commercial banks that refer to the sum of any unpaid debt, which is classified as non-performing loans.
  • Commercial banks offer loans to their non-honored customers, and financial institutions are required to classify them as non-performing assets within ninety days because they do not receive the principal amount or net payments.
  • It represents the total value of loans in a bank’s portfolio that have been classified as non-performing.
  • As Gross NPAs rise, banks are required to make higher provisions to cover potential losses. This can further reduce their profitability and erode their capital base.
  • High Gross NPAs can raise concerns among investors about the bank’s asset quality, leading to a decline in its share price and reduced access to capital markets.


  • It is calculated by summing up all the loan accounts deemed non-performing according to the RBl guidelines. Gross NPA gives an overall picture of the bank’s asset quality and the extent of stressed assets in its loan portfolio.
                                • Gross NPA = Sum of all Non-Performing Loans

Causes of Gross NPA

  • Borrowers who take on excessive debt relative to their income may face difficulties in repaying their loans, contributing to the rise in NPAS.
  • Some borrowers may intentionally default on their loans, resulting in higher NPAs for the lending institution.
  • A downturn in the economy can lead to reduced demand for goods and services, making it difficult for borrowers to repay their loans, resulting in an increase in NPAs.
  • Certain sectors, such as infrastructure or real estate, may face specific challenges that affect the ability of borrowers in these sectors to repay their loans, leading to increased NPAS.

Difference between Gross NPA and Net NPA

  • Gross NPA represents the total value of non-performing loans, while Net NPA accounts for the provisions made against these loans.
  • Gross NPA is an indicator of the overall asset quality of the bank, while Net NPA provides a more accurate measure of the bank’s financial health and the effectiveness of its risk management practices.
  • Gross NPAs do not constitute actual losses to the organization. On the other hand, Net NPAs reflect the company’s real loss following the debt default
  • Gross NPA default period for the loan is Ninety days while NPA has an immediate default period for the loan.

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