PROFORMA NPA

PROFORMA NPA

Subject : Economics

Context : Almost all private sector banks, housing finance companies and NBFCs as well as a few public sector lenders have reported performances for the quarter ended December 31, 2020 with higher pro forma gross non-performing assets compared to the reported gross NPAs.

Concept :

• Supreme Court in its interim order dated 03.09.2020 directed that the accounts that were not declared NPA till 31.08.2020 shall not be declared NPA till further orders.
• Banks, while following SC’s order, are disclosing Proforma NPA as additional disclosure(in addition to gross NPA) for better understanding of financial performance & increasing provision thereon to cover for contingencies.
• Pro forma NPA includes non-performing assets created in 2020 when the RBI allowed banks to standstill recognition of fresh stressed assets.