Explained for children: What are bad debts and non performing assets

Once upon a time, Ram gave Shyam 100 rs. But a few days later, Shyam lost all his possessions. Obviously, Ram cannot get his money back now. The debt that Ram has given to Shyam is a bad debt for him now.

Suppose the same thing happens to a bank? A bank named ABC Bank gave 10 loans to 10 people. Out of these 10, 2 cannot pay back. The money given to these 2 is called NPAs or Non-Performing Assets. So, basically, bad debts of a bank are called Non-Performing Assets.