What is the function of NPA?

NPA, or Non-Performing Asset, refers to loans or advances that are in default or in arrears on scheduled payments of principal or interest. It signifies that the borrower is unable to meet their financial obligations, which can negatively impact a bank's profitability and liquidity. The primary function of identifying NPAs is to assess the quality of a bank's loan portfolio, manage credit risk, and take appropriate measures to recover the funds. Monitoring NPAs is crucial for maintaining financial stability and ensuring the health of the financial system.