The primary difference between Gross NPA and Net NPA is that Gross NPA is the total of all loans that borrowers haven’t repaid. Net NPA, on the other hand, is the outstanding loan amount left after write-offs.
Contents :
- What Is Gross NPA?
- What Is Net NPA?
- Gross NPA vs Net NPA
- Gross Vs Net NPA – Quick Summary
- Difference Between GNPA And NNPA- FAQs
What Is Gross NPA?
Gross Non-Performing Assets (NPA) refer to the total sum of all loan assets that have been classified as non-performing as per the Reserve Bank of India’s guidelines. This is before any provisions or write-offs are accounted for. Gross NPA serves as an indicator of the overall health of a financial institution’s loan portfolio.
For example, let’s consider that the State Bank of India (SBI) reported a Gross NPA of ₹1.5 lakh crore for the financial year 2023-2024. This means that before any provisions or write-offs, the total value of loans that have not been repaid or are in default stands at ₹1.5 lakh crore.
What Is Net NPA?
Net Non-Performing Assets (NPA) are Gross NPAs minus the provisions and write-offs that have been accounted for. This figure gives a more accurate representation of the actual burden of non-performing assets that a financial institution has to bear.
For instance, if the same State Bank of India (SBI) has made provisions amounting to ₹50,000 crore against its Gross NPA, the Net NPA would be ₹1 lakh crore (₹1.5 lakh crore – ₹50,000 crore).
Gross NPA vs Net NPA
The primary difference between Gross NPA and Net NPA is that Gross NPA does not take into account the provisions that the bank has made against its non-performing loans, while net NPA does. This means that net NPA is a more accurate measure of the financial health of a bank than gross NPA.
| Parameter | Gross NPA | Net NPA |
| Definition | Gross NPA is the total value of non-performing assets before provisions. | Net NPA is the value after gross NPA minus provisions and write-offs. |
| Risk Assessment | Provides a broader view of asset quality but may exaggerate risk. | Offers a more accurate representation of actual risk. |
| Regulatory Importance | Used for macro-level analysis by regulators. | More critical for micro-level, institution-specific assessments. |
| Financial Health Indicator | Indicates the overall health of the loan portfolio. | More closely tied to the institution’s actual financial condition. |
| Calculation Complexity | Simpler to calculate as it’s the sum of all bad loans. | More complex as it requires subtracting provisions and write-offs. |
| Usage | Commonly used in initial assessments and public disclosures. | Used in detailed internal analyses and for determining capital adequacy. |
| Impact on Capital Adequacy | Does not directly affect capital adequacy ratios. | Directly impacts capital adequacy as it’s net of provisions. |
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Gross Vs Net NPA – Quick Summary
- Gross NPA represents the total value of non-performing assets before any provisions, while Net NPA is the value after subtracting such provisions.
- Gross NPA is an initial indicator of a financial institution’s loan portfolio health.
- Net NPA provides a more accurate representation of the actual financial burden due to bad loans.
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Difference Between GNPA And NNPA- FAQs
What is the difference between nnpa and gnpa?
The key difference between Net NPA and Gross NPA is that Gross NPA is all the money people owe a bank. Net NPA is that amount minus what the bank has reserved for potential losses. Think of it as the actual debt the bank worries about.
What is a good net NPA?
A good net NPA is low and manageable. The ideal net NPA percentage is under 3%. However, the acceptable level of net NPA can vary depending on the bank’s size, risk appetite, and operating environment.
What is the formula for net NPA?
The formula for calculating Net NPA is:
Net NPA= Gross NPA – (Provisions + Write-offs)
How many types of NPA are there?
- Substandard Assets
- Doubtful Assets
- Loss Assets
What is the difference between standard asset and NPA?
The main difference is that a standard asset is a loan where repayments are made regularly, while an NPA is a loan where repayments have stopped or are irregular.
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