Gross NPA vs Net NPA

Gross NPA vs Net NPA are the terms that denote the total or a part of the loan that is not yet repaid by the borrower.
Imagine a situation where the borrower refuses or simply postpones paying back the money that they borrowed from a moneylender. This is a circumstance when the borrowed asset is referred to as the NPA or non-performing asset. Here, the asset does not longer generate income from that lender simply due to the fact that the borrower does not repay the interest’s principal amount.
Welcome to this post that clearly explains the facts and aspects of non-performing assets. Discover the meaning, terms, and differences between gross NPA vs net NPA.
 

What is Gross NPA?

Now, what do you mean by gross NPA? Simply put, gross NPA refers to the gross non-performing asset. This term is used by commercial banks. It denotes the total sum of an unpaid debt classified as a non-performing loan.
Usually, a commercial bank offers loans to non-honored customers. Financial institutes need to classify them as non-performing assets within a span of ninety days since they don’t get the net payment or its principal amount. That was everything explaining the gross NPA. Now, what is net NPA? Delve into the given point to learn further:
 

What is Net NPA?

Net non-performing asset or net NPA is a term that most commercial banks use to indicate less allowance for any uncertain or poor debts. In simple words, commercial banks offer an amount to cover their debts. Suppose one deducts provisions for unpaid loans, the overall sum will relate to a net non-performing asset.

Gross NPA and Net NPA: Key Differences

Tabulated below is the list of the difference between gross NPA vs net NPA differences.

Point to Point comparison between Gross NPA and Net NPA

From the narrative explained above, you can differentiate between gross NPA vs net NPA. Get an insight into the following points to compare both terms:

●    Definition-wise, gross NPA and net NPA are entirely different. While gross NPA refers to the number of debts an organization fails to collect, net NPA is the amount of loan resulting after deducting provision for unpaid or doubtful debts from the loan defaulted sum.
●    Net NPAs do not comprise a grace period, while gross NPAs have a grace period
●    Causes of gross NPA may be indecent government policies, natural calamities, industrial sickness, or willful defaults, net NPAs are the principal products of gross NPAs
●    Net NPAs may impact profitability as well as the liquidity of a company when compared to gross NPAs
 

Conclusion

So, you have now seen the difference between gross gross NPA vs net NPA. This post has also compiled the definitions, calculations, and other parameters that distinguish both terms from one another.