term loan to be NPA

Guest (Querist) 25 March 2009 This query is : Resolved
my client had taken a Home loan from PNB of Rs.300000/- for 20yr term.
He repaid installments regularly for 1 yr and then due to some financial crisis he failed to pay a total 8 installments. but never failed to pay two installment consecutively,, that means he paid in jan then did not paid feb and again paid march installment .. and so on..
In this way he did not paid a total of 8 installment of total 24000/- (3000x8).
after that he again repaying regularly for last 4 months.
Now the bank manager have sent him a notice that his loan has become NPA and if he fails to repay the sum of 27000/- within 7 days the bank will proceed to sale the property.
My question is as he never failed to repay three consecutive installments how the loan can become NPA?
What action should be taken by him?;Is it possible for a term loan to be NPA if three consecutive installments are not failed???

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adv. rajeev ( rajoo ) (Expert) 26 March 2009
reply the manager giving all details of repayment made by ur client, and take the clarifiction from the bank manager how his account is NPA

Guest (Querist) 26 March 2009
Is it possible for a term loan to be NPA if three consecutive installments are not failed??? Client visited the Branch and asked about it to the BM.
The BM said there is no such rule of consicutiveness,, it becomes NPA if a total of three months installment (principal and/or interest)falls due..

Mahesh (Expert) 27 March 2009
As per the RBI's master circular dated 01-07-2005, An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank.
A non-performing asset (NPA) is a loan or an advance where;
i) interest and/ or installment of principal remain overdue for a period of more than 90 days in respect of a term loan,
ii) the account remains out of order, in respect of an Overdraft/Cash Credit (OD/CC),
iii) the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,
iv) a loan granted for short duration crops will be treated as NPA, if the instalment of principal or interest thereon remains overdue for two crop seasons.
v) a loan granted for long duration crops will be treated as NPA, if the installment of principal or interest thereon remains overdue for one crop season.
The above definition uses the term Overdue in respect of Term loans which has been defined as, any amount due to the bank under any credit facility is overdue if it is not paid on the due date fixed by the bank.

Guest (Querist) 27 March 2009
dear Mahesh please tell me what is the position in the above case...is the bank manager saying wrong?

M. PIRAVI PERUMAL (Expert) 27 March 2009
Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan becomes NPA.