Slippage ratio in Banking

A slippage, in banking, occurs when a bank’s loan becomes a non-performing asset (NPA) the NPAs are added during successive years. NPAs occur when the borrower does not pay Principal or interest for over 90 days.
For instance, the bank’s gross NPA was 5% in the last financial year and is 8% this year due to the fresh accumulation of bad loans. In this case, the slippage would be at 3% for the current year.
So, slippage ratio refers to the rate at which good loans become stressed.
A sharp rise in slippage has a major impact on the provisioning and net profit of the bank.
Low slippage or no slippage in asset quality shows how asset qualities are managed by the bank. When asset quality goes up, the benefits include more liquidity, greater risk capacity, and a lower cost of funds.
Slippage, in finance, refers to the difference between the expected price of a trade and the price at which the trade is executed. It can occur at any time but is most prevalent during periods of high volatility.
It does not denote a negative or positive movement, because any difference between the intended execution price and the actual execution price qualifies as slippage.
The difference can be more favorable, equal to, or less favorable than the intended execution price. The final execution price vs the intended execution price can be categorized as positive slippage, no slippage, or negative slips.