Definition
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.
An asset is classified as a non-performing asset when interest or principal is overdue for more than 90 days. The gross NPA ratio is total gross NPAs divided by gross advances, and it is the headline measure of asset quality the RBI tracks for the banking system.
Indian bank GNPA ratios peaked in the late 2010s after the RBI's Asset Quality Review forced recognition of stressed loans, then fell sharply as banks recovered, wrote off and provisioned bad loans. GNPA is read alongside net NPA and the provision coverage ratio to judge how much stress remains uncovered.
Related terms
- 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.
- Slippage RatioThe slippage ratio measures fresh non-performing assets added during a period as a percentage of standard advances at the start of that period.
- Special Mention Account (SMA)A Special Mention Account is a loan showing early signs of stress, classified by the RBI into SMA-0, SMA-1 and SMA-2 based on how many days payment is overdue, before it becomes an NPA.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.