What is NPA? How is it bad for Banks?
What is the non-performing asset? image source: Housing Which bank should you avoid putting money in it? Here is the long form of NPA is a non-performing asset. When Bank give a loan then that loan will become an asset for the bank. why? Because Bank makes money by giving loans and charging interest on them. But when that loan does not repay by the lender to the bank then it became a non-performing asset called an NPA. This NPA is also called bad loans for a bank. Now you understood why these are called bad loans because they don't work for the bank and become a liability to the banks. This is why a bank's risk is measured by the NPA of the specific bank. In most cases, NPA increases in the bank by giving loans to the corporate segments. The corporate segment is highly volatile and risky. They do not provide any guarantee to lead the market and repay the loan. While the retail segment is considered a low risky segment as there are very less chances of...