Non-Performing Loan (NPL)

A Non-Performing Loan (NPL) is a loan in which the borrower has not made scheduled payments of principal or interest for a specified period, typically 90 days or more. NPLs indicate a higher risk of default and are considered problematic for financial institutions, as they represent loans that are not generating expected revenue. These loans require banks to set aside additional reserves to cover potential losses, impacting their profitability and capital adequacy.