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Consider the following pairings of Non-Performing Assets (NPA) classification in India with their descriptions: 1. Substandard assets : Assets which have remained NPAs for a period less than or equal to 12 months. 2. Doubtful assets : Assets which have remained in the substandard category for a period of 12 months. 3. Loss assets : Assets which are considered uncollectible and of such little value that their continuance as a bankable asset is not warranted, although there may be some salvage or recovery value. Which out of the above pairings are correct?

Consider the following pairings of Non-Performing Assets (NPA) classification in India with their descriptions: 1. Substandard assets : Assets which have remained NPAs for a period less than or equal to 12 months. 2. Doubtful assets : Assets which have remained in the substandard category for a period of 12 months. 3. Loss assets : Assets which are considered uncollectible and of such little value that their continuance as a bankable asset is not warranted, although there may be some salvage or recovery value. Which out of the above pairings are correct? Correct Answer 1, 2 and 3

The correct answer is 1, 2 and 3.

Important Points

  • A non-performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.
    • A loan is in arrears when principal or interest payments are late or missed. A loan is in default when the lender considers the loan agreement to be broken and the debtor is unable to meet his obligations.
  • Banks are required to classify NPAs further into Substandard, Doubtful, and Loss assets, depending on the length of time overdue and probability of repayment.
    1. Substandard assets: Assets which has remained NPA for a period less than or equal to 12 months. Hence 1 statement is correct.
    2. Doubtful assets: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. Hence 2 statement is correct.
    3. Loss assets: As per RBI, “Loss asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted, although there may be some salvage or recovery value”. Hence 3 statement is correct.

Related Questions

With regards to Non-performing Assets (NPA) in Indian banking consider the below statements: A) NPA is Loans or advances for which principal or interest is overdue for more than 90 days. B) Substandard assets under RBI is one which has remained NPA for more than 12 months. C) Doubtful assets are those which have been identified by banks or RBI as having been lost or are uncollectible. Which of the above statements are true?
Consider the following statements.
1. In case of standard assets, provision for NPA must be 25% for all types of standard assets.
2. In case of sub-standard assets, provision for NPA must be 10% for all types of standard assets.
3. In case of doubtful assets, 100% provision is required for unsecured and secured advances.
4. In case of loss assets, 10% of unsecured and 100% of secured advance must be kept as provision for NPAs.
Which of the statement(s) given above is/are correct?
In the question below, are given a statement followed by three courses of actions numbered I, II and III. On the basis of the information given, you have to assume everything in the statement to be true, and then decide which of the following suggested courses of actions logically follow(s) for pursuing. Statement: Former RBI chief Raghuram Rajan has dissected the banking crisis in his recent analysis of non-performing assets (NPAs). He implies that cronyism is an important cause. Rajan says one reason for NPAs was over-optimism after the initial success of public-private partnerships (PPPs) in infrastructure during 2006-08, leading to explosive expansion without due diligence. Second, slower GDP growth after 2008 meant that traffic and industrial demand were far less than projected. This was exacerbated by delays in land acquisition, and non-availability of gas and coal for power plants.  Courses of action: I. Rajan says he sent a list of prominent bank fraud cases to the PMO, but heard nothing more about it. This has led to accusations that cronyism has been the root cause of record NPAs. That is simply wrong.  II. Besides, bond buyers - mutual funds, pension funds, insurance companies - will be decimated if bond defaults are as common as bank NPAs, and the human and economic impact may be just as bad.  III. Banks should not be forced to get into project finance at all, let alone on a grand scale. They grew for decades through working capital and retail lending. They had no ability to judge project costs or risks. But they jumped in, often on political orders or pressures. 
In each question below is given a statement numbered I, II and III. An assumption is something supposed or taken for granted. You have to consider the following assumption and decide which of the assumption is implicit in the statement. Statement: About a year ago, Prime Minister Narendra Modi had told the world that the signature of a chartered accountant on financial statements was, perhaps, more powerful than even one of his own. ‘Just like doctors don’t want people to be ill to get more business, chartered accountants, too, need to safeguard the society’s economic health. Your signature is more powerful than the PM’s, and the government also believes the accounts signed by you’, Modi had said.  Assumptions: I. The CA community, however, may not have woken up to the value of the initials they put on financial statements. Last year has been more of a challenge for the community’s reputation, with banking frauds, asset quality divergences and mid-term auditor resignations dominating the headlines.  II. There cannot be a situation where there will be 100% agreement on everything. You may have rules but still judgmental factors in credit, asset recognition come in. The approach is that as soon as the asset is stretched, banks have to recognise the problem.  III. But even basic logic just went out of the window and banks together kept dishing out loans to such companies even when their annual turnover was half of the total debt.
The question below consists of a set of labelled sentences. These sentences, when properly sequenced form a coherent paragraph. Select the most logical order of sentences from among the options. P - A Non-performing asset (NPA) is defined as a credit facility in respect of which the interest and/or installment of Bond finance principal has remained ‘past due’ for a specified period of time.  Q - Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset.  R - 'Non Performing Assets' have been in the news recently. S - It must be noted, Non-performing assets are problematic for financial institutions since they depend on interest payments for income.
The given pie chart shows information about Non-Performing Assets (NPA) processed by the various banks of India till December 2017. If the total NPAS under all the banks are worth Rs. 300 lakh crores, then NPAS worth how much (in Rs. Lakh crores) does Bank ‘C’ contains till December 2017?
The given pie chart shows information about Non-Performing Assets (NPA) processed by the various banks of India till December 2017. If the total NPAs under all the banks are worth Rs. 300 lakh crores, then NPAs worth how much (in Rs. lakh crores) does Bank ‘E’ contain till December 2017?
The following pie diagram shows information about Non Preforming Assets (NPA) processed by the various banks of India till 2017 December. If the total NPA under all the bank is 300 lakh cores, how much NPA does bank ‘F; contain (in lakh crores)?
The given pie chart shows information about Non-Performing Assest (NPA) processed by the various banks of India till December 2017. If the total NPAs under all the banks are worth Rs. 300 lakh crores, then NPAs worth how much (in rs. Lakh crores) does Bank B contain till December 2017?
Which one of the following is the correct sequence of various stages of operating cycle of a manufacturing company?  1. Raw material conversion period, work-in-progress conversion period, Finished goods conversion period, Receivables conversion period 2. Raw material conversion period, work-in-progress conversion period, Creditors payment period, Receivables conversion period 3. Creditor payment period. Raw material conversion period, Receivables conversion period, work-in- progress conversion period 4. Raw material conversion period, Finished goods conversion period, work-in- progress conversion period. Receivables conversion period