NPFO

NPFO stands for "Non-Performing Financial Obligation." It is a term used in finance and accounting to describe a debt or financial instrument that is not generating the expected income or returns for the lender or investor. This typically occurs when the borrower or issuer of the obligation fails to make timely payments of principal or interest.

Non-performing financial obligations can arise in various forms, including loans, bonds, mortgages, and other forms of credit. When a loan becomes non-performing, it is often referred to as a "non-performing loan" or NPL. These NPLs can pose significant risks to financial institutions, potentially leading to reduced profitability, increased capital requirements, and, in severe cases, insolvency.

The classification of a financial obligation as non-performing usually follows specific criteria set by regulatory bodies. For instance, a loan might be considered non-performing if payments are overdue by a certain period, such as 90 days. Once an obligation is deemed non-performing, lenders may take various actions to recover their funds. These actions can include restructuring the debt, selling the obligation to a third party, or initiating legal proceedings. Managing and resolving NPFOs is a critical aspect of risk management for banks and other financial institutions.