Except for those who actually are planning to commit fraud, every borrower who ever applied to a bank promised to pay the loan back, and planned to do that. Yet, banks always seem to have some bad debt, debt that is "non-performing." How does a bank minimize the losses from bad debt?
Except for those who actually are planning to commit fraud, every borrower who ever applied to a bank promised to pay the loan back, and planned to do that. Yet, banks always seem to have some
The loans and advances given to bank’s customer will comprise the bank’s asset. When the returns or gains from the bank’s assets do not received then these assets will become non-performing. Therefore these assets are known as non-performing assets.
The bank should categorize their non-performing assets into three categories i.e. substandard assets (if assets were remain non-performing for less than or equal to a year), doubtful assets (assets remain non-performing for more than a year till three years) and losses (if these assets remain non-performing for more than 3 years).
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