What is Non-Performing Asset (NPA)?
Nexa Consultancy | Startup & Finance Glossary
A Non-Performing Asset (NPA) is a loan or advance for which the principal or interest payment has remained overdue for a period of 90 days or more. It is a key indicator of the health of a bank or lending institution's loan portfolio.
For Startups: While typically associated with banks, the concept is relevant for FinTech lending startups. If a startup is in the business of lending, it must have a robust process for monitoring its loan book and classifying overdue loans as NPAs. A high NPA ratio is a major red flag for investors and regulators, indicating poor credit quality and underwriting processes.
Example: A P2P lending platform has a loan where the borrower has not made any payment for over 90 days. The platform must classify this loan as an NPA and make provisions for the potential loss.