Stressed assets
Topic: Banking Regulation, NPAs and Financial Stability · NCERT: Beyond NCERT
Meaning
Stressed assets give a fuller picture of a bank's bad loans than NPAs alone.
Stressed assets = Gross NPA + restructured standard advances + written-off loans
This matters because banks can make the NPA figure look small in two ways:
- Restructuring: changing loan terms, which lets a struggling loan stay "standard"
- Writing off: removing a bad loan from the books
Counting all three shows how much of the loan book is really in trouble.
Example
Suppose a bank reports Gross NPA of Rs 100 crore. It also has Rs 40 crore of restructured loans shown as standard and Rs 30 crore of written-off loans. Its stressed assets are Rs 170 crore, far more than the NPA figure suggests.
Don't confuse with
- Gross NPA: covers only loans overdue for more than 90 days. It misses restructured and written-off loans.
Related concepts
- Standard asset
- Special Mention Account
- Non-Performing Asset
- Sub-standard asset
- Doubtful asset
- Loss asset
- Gross and net NPA
- Loan loss provisioning
- Provisioning Coverage Ratio
- Expected Credit Loss provisioning