When one or more payments of a loan are not paid on time and become overdue, the full amount of the loan will be at risk. In other terms the total loan outstanding with the borrower may not be received. The portfolio at risk formulation helps to identify the default risk on the total portfolio. It is the international standard for measuring loan delinquency. It measures compare apple with apples. Both the numerator and the denominator of the ratio are outstandingbalance. 

A method for calculating the credit risk associated with loans. It examines how many loans are not repaid on time; this tells us whether or not those loans will be repaid. Lenders can better comprehend the credit risk that is present in their portfolio by understanding the PAR.