NPA stands for non-performing assets.  When the borrowers stops paying interest or principal amount on loans, the lenders loses their money. This type of loan is known as NPA(non performing assets). Our banking industry is seriously affected by NPA(non performing assets). 

For a bank, the loan lend by them is basically their assets. So if the principle amount or interest amount or both of them is not being returned bank to the bank, then it is considered to be Non performing assets.

Let us understand this with example for better understanding:- 

Suppose a bank like State bank lends a loan of amount of 10 crore rupees to a company like Kingfisher. Considered that the company agreed to pay 10% annum on the loan they avail. At the beginning every thing was good and bank happily lending money to the company but with the course of time the company starts to fail and the owner spends most of the portion money on his lavishing lifestyle and was not able to pay the interest amount within the period of 90 days, then this becomes NPA.

Reserve Bank of India defines NPA as an asset , a leased asset, becomes nonperforming when it ceases to  generate income for the banks. There are three categories of NPA in our country:-

Substandard Assets - Those assets which remains NPA for less than or equal to 12 months.

Doubtful Assets- Those assets which remains NPA for more than 12 months period.

Loss Assets- Assets whose loss has identified by bank or RBI, but there remains some value in it. This type of NPA is not completely written off.

How bad is India's situation of NPA-

More than Rs. 7 lakh crore worth loans are classified as NON-Performing loans in India. This is a huge amount.

The figure roughly translates to near 10% of all loans given.

This means that about 10% of loans are never paid back, resulting in substantial loss to the bank.

NPA crisis is very worst in INDIA.

This crisis can lead to the same situation of 2008 crisis of USA economy.

Among the BRICS nations, India is worst among all the emerging economy nation.

The current rate of NPA is not healthy for India's economy. A strong banking sector is backbone of any country's better economy. It makes a country's economy a very strong economy. A strong economy will have huge saving amount and it can channelize those money into the investments. Increased NPA fragile the banking sector and ultimately fragile country economy. In India, Infrastructure accounts for highest number of NPA i.e. 53% .  Due to high number of NPA in this sector, banks are very reluctant to fund this sector. Infrastructure is one of the most important part of economy , which promotes other sectors of economy. Drainage of resources to infrastructure may hamper the economy of the country.

There is urgent need of tackling the NPA of our country from these remedies:-

An important mechanism to tackle and find hidden NPAs.

Technology to identify the early warnings.