Non-performing Loans (NPL)

Loans that aren't being repaid.

When borrowers stop repaying, those loans become non-performing. The NPL ratio is the share of a bank's loans that are bad, a direct measure of asset quality and risk. Lower is better. NPL ratio = Non-performing loans ÷ Total loans × 100 Of Rs 1,000 in loans, Rs 30 are non-performing. NPL = 3%. Low NPL Healthy loan book, disciplined lending. Rising NPL Deteriorating asset quality, a warning sign. High NPL Serious risk; future profits may be eaten by loan losses. Direct asset-quality read Early risk warning Comparable across banks Reporting can lag reality Definitions vary by regulator One number hides loan mix

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: Banks.