BANKING GENERAL KNOWLEDGE
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Recovery of bank’s funds are difficult
|
|
|
Interest on these accounts are not charged
|
|
|
Banks have to make provision for these loans in their balance sheet
|
|
|
All of the above
|
Detailed explanation-1: -When the borrower stops paying interest or principal on a loan, the lender will lose money. Such a loan is known as Non-Performing Asset (NPA). Indian Banking industry is seriously affected by Non-Performing Assets.
Detailed explanation-2: -Have you heard about Banking NPA? Loans or advances provided by the banks are considered as banks’ assets as banks will earn interest on them. The businesses sometimes default on the loan repayments and this causes banking NPA (non-performing assets).
Detailed explanation-3: -A non-Performing Loan is a condition where debtors, both individuals and business entities, are unable to pay their installments or debts to the lender on time. This condition can be caused by many things, such as the debtor losing his main income, being absent in a planned manner in making payments, and others.
Detailed explanation-4: -In both the models, the impact of Net Non-performing assets is-0.191 for random effects model and-0.195 for fixed effects model, and in both cases it is highly statistically significant at 1% level. Thus, it can be seen that Non-performing assets have a negative impact on profitability (return on assets) of banks.
Detailed explanation-5: -What is a Non-Performing Asset? 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.