A Non-performing loan is a loan where the borrower has failed to make the agreed upon scheduled payments based on the loan agreement. In simple terms, a loan that is nearing a default or is already defaulted is referred to as a non-performing loan. After the loan reaches the non-performing state, the probability of its repayment reduces significantly. Though it depends on the terms of the contract, a loan classifies as non-performing after a duration of 90 days where the interest payments are overdue. The International Monetary Fund defines Non-Performing Loans in the following manner:

‘A non-performing loan is any loan in which: interest and principal payments are more than 90 days overdue; or more than 90 days’ worth of interest has been refinanced, capitalized, or delayed by agreement; or payments are less than 90 days overdue but are no longer anticipated.’