Definition
Stressed Assets
Stressed assets are the total of a bank's non-performing assets plus restructured and written-off loans, capturing the full extent of troubled credit.
The headline GNPA ratio alone can understate problems because it excludes restructured standard loans and accounts kept alive through evergreening. Stressed assets add these to give a broader, more honest measure of credit trouble.
During India's bad-loan cycle, the gap between reported NPAs and total stressed assets was a major concern, prompting the RBI's Asset Quality Review. Analysts track stressed-asset ratios to anticipate future slippages and the provisioning a bank may still need.
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.
- 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.
- 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.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.