Npa
In short
Non-performing assets (NPAs) are loans or advances where the borrower has stopped making interest or principal payments for a set period.
In plain words
When a person or a company borrows money from a bank but fails to pay it back on time, the loan becomes an NPA. It is essentially a bad loan that is no longer earning money for the bank.
A simple example
A small shop takes a loan to buy new ovens but fails to make any monthly payments for 90 days. The bank then marks that loan as an NPA.
Why it matters
High levels of NPAs reduce a bank's profitability and its ability to lend money to others. If too many loans go bad, it can threaten the stability of the entire banking system.
Easy to mix up
Do not confuse NPAs with simple late payments; an NPA is a specific legal classification used once a payment is significantly overdue.