Net NPA ratio
Net Non-Performing Assets
Net NPA is the percentage of a bank's loans, after provisions, that are not coming back. It measures the one skill a bank cannot do without: judging who will repay.
Formula
Net NPA
Net NPA (%) = (Gross NPAs − Provisions) ÷ Net Advances × 100
Benchmark: Lower is better; focus on net NPA, not gross
Reading the number
Banking is the business of lending. A bank that is good at telling who will repay from who will not is automatically the best bank, because everything else, growth, capital, margins, follows from that judgement. This single ratio is why HDFC Bank is regarded as one of the best banking franchises not just in India but globally.
Look specifically at net NPA, which is what remains after the bank has set aside provisions, rather than gross NPA.
Indian example
Related ratios
Glossary terms
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