Net Loans

This data item is specific to banks and financial institutions. It refers to the total amount of loans lent by the company minus possible default losses.

Let’s say a bank has 10 customers and it has lent Rs.10,000 to each one of them. It estimates that about 2% of the total loan amount might never be returned and makes provisions for the same. So, the total loan amount is Rs.1,00,000 (10,000 * 10). Loan loss provision is Rs 2,000 (2% * 1,00,000). Hence, the net loan amount will be Rs.98,000 (1,00,000 – 2,000).

Net loans is recorded on the assets side of the balance sheet.