Non-performing asset

A non-performing loan (NPL) or non-performing asset (NPA) is a bank loan that is subject to late repayment or is unlikely to be repaid by the borrower in full. Non-performing loans represent a major challenge for the banking sector, as they reduce profitability. They are often claimed to prevent banks from lending more to businesses and consumers, which in turn slows economic growth, although this theory is disputed. Several jurisdictions have prudential regulations that require a specific portion of a bank's NPL to be reserved to offset potential losses.