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Gross NPA vs net NPA: the difference and how to calculate both

5 min read · Updated 2 November 2026

Gross NPA tells you how much of the book has gone bad. Net NPA tells you how much of that is not yet covered by money set aside. Reading one without the other gives half the picture.

The two ratios

• Gross NPA ratio = gross NPAs divided by gross advances.
• Net NPA ratio = net NPAs divided by net advances, where net means after deducting the provisions held against NPAs.
• Provision coverage ratio = provisions held against NPAs divided by gross NPAs.

The exact items that count as provisions in the deduction are set in the regulator's reporting format. Use that format when you report externally.

A worked example

These numbers are made up to show the arithmetic. Two lenders with the same gross ratio can have very different net ratios if one provides more.

How to read the pair

• Gross high, net low: the problem is large but well provided for.
• Gross low, net high: little is bad, but little is covered. Provisions may be lagging.
• Gross falling because of write-offs: check the write-off line before celebrating. The bad loans did not recover, they left the book.
• Net NPA rising faster than gross: provisioning is not keeping pace.

Mistakes to avoid

• Dividing net NPAs by gross advances.
• Mixing a lender's whole-book ratio with a one-product figure.
• Comparing across lenders without checking the provisions definition.
• Using a month-end figure from one source and a quarter-end from another.

Frequently asked questions

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