A loan is typically considered a non-performing asset (NPA) after the borrower has failed to make payments of principal or interest for a certain period of time, usually 90 days or more. Once a loan becomes an NPA, it is considered to be in default and the lender must make provisions for the amount of the loan in their accounts.
The exact time frame for a loan to become an NPA may vary depending on the country and the specific lending institution. For example, in India, the Reserve Bank of India (RBI) has specified that a loan becomes an NPA if the borrower has not made any payments of principal or interest for a period of 90 days.
In the United States, the guidelines for classifying loans as NPAs are set by the Federal Reserve and other regulatory bodies. Typically, a loan will become an NPA after the borrower has failed to make payments for several months, but the exact time frame may depend on the type of loan and the lending institution.
It is important for borrowers to be aware of the terms and conditions of their loans and to make every effort to make their payments on time. If a borrower is unable to make their loan payments, they should communicate with their lender as soon as possible to discuss alternative repayment options. For lenders, it is important to carefully monitor their loan portfolios and take appropriate action to minimize losses in the event of an NPA.
