What is infection ratio?
This is a financial management technique designed to measure the proportion of non-performing loans in a portfolio.
Where have you heard about infection ratio?
You might have heard how it's used by central banks and credit rating agencies. A country's central bank may look at the proportion of "bad loans" to find out if they pose a threat to the banking system.
What you need to know about infection ratio.
The purpose of calculating the infection ratio is to find out the relationship between the non-performing part of a portfolio - the loans that are not efficiently being recovered - and the total portfolio of the bank or financial institution. This can then be compared with the ratio over a different time period, among different organisations or against an industry standard. A central bank can also compare the number of non-performing loans in different sectors such as mortgage loans and commodity financing.
Find out more about infection ratio.
A non-performing loan is one that's in default or close to it. Find out more about what this means.