Non-Performing Assets In The UAE

Banks, like other businesses, run on profit. A major source of profit for the banks is the interest paid by the borrowers of loans. This includes cash advances, overdrafts, payday loans, secured loans, and unsecured loans, among many others. The interests levied on these loans are paid monthly by its customers which form one of the avenues of income for the bank.

When a customer defaults in the payment of interest or stops paying interest altogether, then the loan is said to become a Non-Performing Loan ("NPL"). According to the IMF guidelines, a loan becomes an NPL in the following instances:

1. If interest payment on the loan has not been made for 90 days or more.
2. If interest amounting to 90 days' worth or more has been capitalized, refinanced, or rolled over.