Non-performing loan (NPL)
What is a non-performing loan?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
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A non-performing loan is one the bank no longer expects to be paid as agreed: by the common definition, a payment ninety days or more past due, or earlier where the bank judges the borrower unlikely to pay in full without the security being sold. Because the second test is a judgement, a loan can be non-performing before a single payment has been missed. The classification moves the loan to a larger provision and usually to the bank's recovery team, and the share of loans that are non-performing is the first number an analyst reads about a bank's book.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
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