Definition
Gross Advances vs Net Advances
Gross advances are a bank's total loans before deducting provisions, while net advances are gross advances minus provisions and certain other items.
The distinction matters for ratio analysis. The gross NPA ratio uses gross advances, while the net NPA ratio uses net advances. The gap between the two reflects how much provisioning a bank has done against its book.
Reporting both lets investors see the full size of the loan book and the buffer held against it. A bank with high provisions will show net advances meaningfully below gross advances, signalling conservatism and a strong provision coverage ratio.
Related terms
- Gross NPA Ratio (GNPA)The Gross NPA ratio is the share of a bank's total advances that have turned into non-performing assets, before deducting provisions held against them.
- Net NPA RatioThe Net NPA ratio is gross non-performing assets minus provisions held against them, expressed as a percentage of net advances.
- Provision Coverage Ratio (PCR)The Provision Coverage Ratio is the proportion of a bank's gross non-performing assets covered by provisions, showing how well it is buffered against loan losses.
- Advances (Banking)Advances are the loans a bank extends to borrowers, forming the main interest-earning asset on its balance sheet.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.