Banking & Financial Awareness
Non-performing loan
Loan that is unlikely to be repaid
Overview
A non-performing loan (NPL) or non-performing asset (NPA) is a bank loan that is subject to late repayment or is unlikely to be repaid by the borrower in full. Non-performing loans represent a major challenge for the banking sector, as they reduce profitability. They are often claimed to prevent banks from lending more to businesses and consumers, which in turn slows economic growth, although this theory is disputed. Several jurisdictions have prudential regulations that require a specific portion of a bank's NPL to be reserved to offset potential losses.
Source: Wikipedia — Non-performing loan (CC BY-SA)
Key concepts
How Non-performing loan connects to the ideas, people and events around it.
In finance, a loan is the tender of money by one party to another with an agreement to pay it back. The recipient, or borrower, incurs a debt and is usually required to pay interest for the use of the money.
In economics, economic growth is an increase in the quantity and quality of the economic goods and services that a society produces. It can be measured as the increase in the inflation-adjusted output of an economy in a given year or over a period of time.
Financial regulation is a broad set of policies that apply to the financial sector in most jurisdictions, justified by two main features of finance: systemic risk, which implies that the failure of financial firms involves public interest considerations; and information asymmetry, which justifies curbs on freedom of contract in selected areas of financial services, particularly those that involve
The European Union (EU) is a political and economic union of 27 member states that are located primarily in Europe.
The 2008 financial crisis was a major worldwide financial crisis which started in the U.S. The cause of the crisis was the collapse of the 2000s U.S. housing bubble.
The European Council is a collegiate body and a symbolic collective head of state, that defines the overall political direction and general priorities of the European Union (EU).
The European Commission (EC) is the executive cabinet of the European Union. It is composed of 27 members of the Commission corresponding to the number of member states, unless the European Council, by unanimous consent, decides to alter this number.
The secondary market, also called the aftermarket, is the financial market in which previously issued financial instruments such as shares, bonds, options, and futures are bought and sold.
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Questions about Non-performing loan
What is Non-performing loan?
A non-performing loan (NPL) or non-performing asset (NPA) is a bank loan that is subject to late repayment or is unlikely to be repaid by the borrower in full. Non-performing loans represent a major challenge for the banking sector, as they reduce profitability. They are often claimed to prevent banks from lending more to businesses and consumers, which in turn slows economic growth, although this theory is disputed.
What are the key concepts related to Non-performing loan?
The main concepts connected to Non-performing loan include Loan, Economic growth, Financial regulation, European Union, 2008 financial crisis, European Council, European Commission, Secondary market. Each is linked on the map above with its own summary.
Which exams cover Non-performing loan?
Non-performing loan is part of Banking & Financial Awareness, which appears in the syllabus of IBPS PO, IBPS Clerk, IBPS RRB, IBPS SO, SBI PO, SBI Clerk and 4 more exams.