Non-performing assets (NPA) are loans or advances that have stopped generating income for a bank or

financial institution because the borrower has failed to repay the principal or interest on the loan for a
specified period. In other words, an NPA is a loan or credit facility on which the borrower has failed to
make payments for 90 days or more.

Dealing with NPAs is crucial for banks and financial institutions because they directly impact their
profitability and can have a ripple effect on the overall economy. Here are some ways to deal with NPAs:

1. Loan restructuring: Banks can consider restructuring loans and extending the repayment period
to make it easier for borrowers to repay the loan.

2. Loan recovery: Banks can take legal action against defaulters and initiate loan recovery
proceedings. This can include seizing collateral, auctioning assets, or filing for bankruptcy.

3. Asset reconstruction companies: Banks can sell their NPAs to asset reconstruction companies,
which specialize in recovering money from defaulters.

4. Loan write-offs: Banks can write off loans that they consider irrecoverable. However, this option
should be considered only after all other measures have been exhausted.

5. Prevention: Banks can take preventive measures to avoid NPAs in the first place. This can include
conducting thorough credit assessments before lending money, monitoring borrower behavior
closely, and setting up effective recovery mechanisms.

Dealing with NPAs requires a proactive approach by banks and financial institutions. By taking
appropriate measures to recover their money, banks can minimize the impact of NPAs on their
profitability and the overall economy.