Discussion is one of the most important parts of any research. Researcher has linked the theory with literature review and data analysis with empirical data. Researcher discussed the interviews responses based on the theories that have been presented. Detailed discussion of effects in Non-performing assets. 

Classification of assets for making provision:

For the purpose of making provisions for doubtful loans, banks need to classify them into following broad categories:

Performing assets

Non-performing assets

Performing assets:

Performing assets is also known as standard assets/loans where the interest or principal are not overdue beyond 180 days at the end of the financial year. Such business will not carry more than normal business risk.

Non-performing loans:

Any loan the repayment of which is overdue beyond 180 days or two quarters is considered as NPA. It is further classified into:

Sub-standard assets

Doubtful assets

Loss assets

Sub-standard assets:

Sub-standard asset is one which has been classified as NPA for period not exceeding two years. With effect from 31 March 2001 sub-standard asset is one, which has remained NPA

Doubtful assets:

A doubtful asset is one which has remained NPA for a period exceeding two years. With effect from 31 March 2001 an asset is to be classified as doubtful if it has remained NPA for a period exceeding 18 months. A loan classified as doubtful has all the weaknesses inherent in that classified as sub-standard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts conditions and values highly questionable and improbable.

Loss assets

A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has been written off wholly or partly. Bankable asset is not warranted although there may be some salvage or recovery value. The assets which have been wholly written off should not be reported in SBR. However, in case of partly written off assets, the amount of technical write off, if any, should be reduced from outstanding gross advances and all the assets will handed over to recovery agents for sale.