What happens if a loan account becomes NPA ?
What is Non-Paying Assets or NPA? When a person takes a loan from a bank or financial institute and fails to repay, then the loan goes into the NPA category. The bank has no choice other than to seize the mortgaged assets and selling them. There could be complications in this process because the asset will have to be sold at a lower price than the original. When a loan goes into the category of NPA, banks can transfer the loan into equity. It will bring new promotors or management. It is called SDR or Strategic Debt Restructuring Scheme. It has been a good solution to control the npa in India. The bank can also help out the borrowers by restructuring the loan. Alternatively, the bank or financial institution can take the following steps: Extend the repayment time Waive some amount of loan or reduce the interest rate Combine these processes You can sell the NPA to the Asset Reconstruction Company(ARC). It procures the bad loans or non-performing assets that commercial or other bank...