What are non-performing loans (NPLs)?
The NPL ratio is the standard test of a bank's loan quality — what counts as non-performing, why it matters, and how to read the trend.
A non-performing loan is a loan whose borrower has stopped making scheduled payments — typically for 90 days or more. When a loan goes non-performing, the bank can no longer count on that income, and it may have to write off part of the money it lent. The NPL ratio — non-performing loans as a share of all loans — is the standard way to measure a bank's asset quality: how healthy its loan book really is.
Why the NPL ratio matters
- Loans are a bank's main earning asset. Every loan that stops paying hits both income and capital — the same cushion measured by the Capital Adequacy Ratio.
- A bank can look profitable while quietly stacking up bad loans. Rising profits alongside a rising NPL ratio is a warning sign that growth came from lending to weaker borrowers.
- Because provisions for bad loans come straight out of profit, a sudden jump in NPLs often shows up in earnings a year or two later — see reading a bank's income statement.
How to read it
Lower is better
A small share of bad loans means underwriting standards are holding up. There is no single "good" number for every market, but supervisors and investors alike get uneasy as the ratio moves toward double digits.
Watch the trend, not just the level
An NPL ratio climbing for several years in a row deserves attention even while it stays low — it tells you where the loan book is heading. A falling ratio, by contrast, usually means recoveries, write-offs, or tighter new lending.
Compare over the same period
Fast loan growth can temporarily dilute the ratio, making a young, aggressive loan book look cleaner than a mature one. Compare banks over the same fiscal years, and pair the NPL ratio with loan-book growth from the balance sheet.
The rules on this platform
On each bank's profile, the rule-based health indicator treats an NPL ratio above 10% as elevated credit stress and moves the indicator toward watch. The thresholds are published, versioned, and visible on the banking sector dashboard and on the methodology page — they are applied mechanically, never judged by an AI.
Every NPL figure on this platform comes from the bank's own published disclosures, with the source document linked next to the number. Compare banks side by side on the compare page.