Definition
Slippage Ratio
The slippage ratio measures fresh non-performing assets added during a period as a percentage of standard advances at the start of that period.
Slippage captures how many previously good (standard) loans turned bad in a quarter or year. It is a forward-looking gauge of asset-quality momentum, more telling than the static GNPA ratio because it shows the pace of new stress.
Indian analysts track slippages alongside upgrades and recoveries to compute net additions to NPAs. A falling slippage ratio signals improving credit quality, while a spike often precedes a rise in credit cost and pressure on profitability.
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.
- Credit CostCredit cost is the provisioning a bank or NBFC books for bad and doubtful loans during a period, usually expressed as a percentage of average advances.
- 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.
- Restructured AssetsRestructured assets are loans whose terms, such as tenure, interest rate or repayment schedule, have been modified because the borrower is in financial difficulty.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.