08/12/2018
Stressed assets = NPAs + Restructured loans +Written Off Assets
The most important scale of asset quality is Non-Performing Assets (NPA).
An NPA means interest or principal is not repaid by the borrower during a specified time period (90 days). NPAs assets are further classified into substandard asset, doubtful asset, and loss assets depending upon how long a loan remains as an NPA.
Restructured asset or loan are that assets which got an extended repayment period, reduced interest rate, converting a part of the loan into equity, providing additional financing, or some combination of these measures. Hence, under restructuring a bad loan is modified as a new loan. But the real problem is that it was actually an NPA. -
Hence, the restructured loan is also a weak loan. NPAs and restructured loans together show the low asset quality of banks. These together are hence called stressed assets.
Written off assets are those the bank or lender doesn’t count the money borrower owes to it. The financial statement of the bank will indicate that the written off loans are compensated through some other way. There is no meaning that the borrower is pardoned or got exempted from payment.
