Question
Download Solution PDFA loan becomes a Non-Performing Asset (NPA) when the interest or principal becomes overdue for a period of:
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is 90 days.
- Most of the time, debt is classified as nonperforming when loan payments have not been made for a period of 90 days (Standard period).
- A nonperforming asset is a debt obligation where the borrower has not made any previously agreed-upon interest and principal repayments to the designated lender for an extended period of time.
- A loan can be classified as a nonperforming asset at any point during the term of the loan or at its maturity.
Important Points
- Type of non-performing asset:
- The most common nonperforming assets are term loans.
- Overdraft and cash credit (OD/CC) accounts were left out-of-order for more than 90 days.
- Agricultural advances interest or principal instalment payments remain overdue for two crop/harvest seasons for short duration crops or overdue one crop season for long duration crops.
- Banks are recording Non-Performing Assets (NPA) in three categories: sub-standard assets, doubtful assets, and loss assets.
- A sub-standard asset is an asset classified as an NPA for less than 12 months.
- A doubtful asset is an asset that has been non-performing for more than 12 months.
- Loss assets are loans with losses identified by the bank, auditor, or inspector that need to be fully written off.
Last updated on Jun 26, 2025
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