BANKING AFFAIRS

Detailed explanation-1: -A non-performing asset (NPA) is a classification used by financial institutions for loans and advances on which the principal is past due and on which no interest payments have been made for a period of time.

Detailed explanation-2: -loans and advances means any direct or indirect advance of funds (including obligations as maker or endorser arising from discounting of commercial/business paper) which are made to a person on the basis of an obligation to repay the funds. “Loans and advances” also includes all exposures as defined in the Act.

Detailed explanation-3: -Loans refer to a debt provided by a financial institution for a particular period while Advances are the funds provided by the banks to the business to fulfill working capital requirement which are to be payable within one year.

Detailed explanation-4: -Ans: Loans and advances undertaken are recorded on the liabilities side of an organisation’s balance sheet as it must repay the amount. It can further be recorded under long-term or short-term, based on the nature of the loan or advance taken.