Banking, mapped
MapGlossary
What kills the spread: NPAs·4 of 5
  1. What an NPA is (the 90-day rule)→
  2. SMA stress buckets (SMA-0/1/2)→
  3. Asset classification (standard → loss)→
  4. Provisioning→
  5. IRAC norms

What kills the spread: NPAs

Provisioning: why a bad loan hits profit before it's written off

Profit set aside to cover a bad loan — taken now, long before any write-off.

Why it matters

Provisioning is why one big account going bad can wreck a quarter — it's how "operating profit but net loss" actually happens.

A worked example

One ₹1,000 cr loan turning doubtful forces a ₹400 cr provision — collapsing a ₹500 cr quarter to ₹100 cr net, with no cash gone yet.

The picture

Loan classifiedworseProvision charged toP&LNet profit / NIMbenefit erodedProvision CoverageRatioforces a provisionreducescoverage measured by

What it leads to

Provisions eat directly into the spread NIM worked to build — the marquee link: a bad loan eats the spread.

Where it sits in the map

Assetclassification(standard → loss)Assetclassification(standard → loss)ProvisionCoverage Ratio(PCR)Net InterestMargin (NIM)Gross & Net NPAratioIRAC normsWhat an NPA is(the 90-day rule)Provisioning

Follow the causation

this is what determines the size of each provisionAsset classification (standard → loss)→this is the ratio that measures how well-provisioned the bank isProvision Coverage Ratio (PCR)→this is the margin that provisioning silently eatsNet Interest Margin (NIM)→