Definition
Gross Slippage vs Net Slippage
Gross slippage is the total of fresh loans turning into NPAs in a period, while net slippage subtracts upgrades and recoveries from those bad loans.
Gross slippage captures all new additions to the NPA pool, but some of those accounts are later upgraded back to standard or partly recovered. Net slippage, gross slippage less upgrades and recoveries, shows the true net deterioration in the loan book.
Focusing only on gross slippage can overstate stress if recoveries are strong; focusing on the change in GNPA can understate it if write-offs mask additions. Analysts therefore reconcile opening NPAs, gross slippages, upgrades, recoveries and write-offs to understand asset-quality movement fully.
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.
- 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.
- Write-Off (Loans)A loan write-off is the removal of a bad loan from a bank's balance sheet against provisions already made, even though the bank may still pursue recovery.
- Recovery (Loans)Loan recovery is the money a bank gets back from a defaulted or written-off borrower, through settlement, asset sale, legal action or insolvency proceedings.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.