In this quarter banks have delivered a poor set of quarterly results (Q3 2016) which was largely based on non performing assets(NPAs) as most of the banks have seen a sharp deterioration in their asset quality or what is called rising NPAs or non performing assets.

When the principal and interest on loan borrowed is not paid for three consecutive months or 90 days, then it becomes a non performing asset for a bank or financial institution.

The RBI governor in his latest speech said that " Banks need to do deep surgery such as restructuring or writing down loans, the bank has to recognize it has a problem - classify the asset as a Non Performing Asset (NPA)"

Think therefore of the NPA classification as an anesthetic that allows the bank to perform extensive necessary surgery to set the project back on its feet. If the bank wants to pretend that everything is all right with the loan, it can only apply band aids - for any more drastic action would require NPA classification, Rajan said.

Banks with highest NPA

Why Are NPAs of Banks Rising?

The Reserve Bank of India has directed banks to classify as NPAs, any accounts that were also looking a little more stressed. This led to a host of bank classifying their assets as NPAs in this quarter.

There is a possibility that the next quarter would also be equally bad, if not worse. How far this NPA problem could go, nobody seems to know. How many skeletons are there is in the cupboard, you can just keep guessing.

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