A strong banking sector is important for flourishing economy. The failure of the banking sector may have an adverse impact on other sectors. High level of Non Performing Assets (NPA) suggests low credit quality and warrants high provisioning, which has direct bearing on profitability and net-worth of banks and value of shareholders. The increased incidence of NPA is one of the major concerns of Indian Banks in the recent years.  An asset is classified as NPA, if due in the form of principal and interest are not paid by the borrower for a period of 90 days. If any advance or credit facility granted by banks to a borrower becomes non-performing, then the bank will have to treat all the advances/credit facilities granted to that borrower as non-performing without having any regard to the fact that there may still exists certain advances / credit facilities having performing status.

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