SME short notes on Non-Performing Loan
Posted by Ripon Abu Hasnat on Thursday, November 19, 2015 | 0 comments
A non-performing loan is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 90 days, but this can depend on the contract terms.
“A loan is nonperforming when payments of interest and principal are past due by 90 days or more, or at least 90 days of interest payments have been capitalized, refinanced or delayed by agreement, or payments are less than 90 days overdue, but there are other good reasons to doubt that payments will be made in full” (International Monetary Fund).
By bank regulatory definition non-performing loans consist of:
• other real estate owned which is taken by foreclosure or a deed in lieu of foreclosure,
• loans that are 90 days or more past due and still accruing interest, and
• Loans which have been placed on nonaccrual (i.e., loans for which interest is no longer accrued and posted to the income statement).
• other real estate owned which is taken by foreclosure or a deed in lieu of foreclosure,
• loans that are 90 days or more past due and still accruing interest, and
• Loans which have been placed on nonaccrual (i.e., loans for which interest is no longer accrued and posted to the income statement).
In Bangladesh, non-performing loans are common in the agricultural sector where the farmers can't pay back the loan or the interest amount mainly as a result of losses due to floods or drought.
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