CS Professional · Banking and Insurance - Laws and Practice · Analysis of Financial Statements of Banks
A bank classified the term loan of Mehta Engineering as a sub-standard asset on 1 April 2024. Assuming the account has not improved and no upgrade has occurred, from which date would it become a doubtful asset under the RBI norms?
It becomes doubtful on 1 April 2025. RBI norms classify an asset as doubtful when it has remained in the sub-standard category for 12 months, so a loan that turned sub-standard on 1 April 2024 moves to doubtful after one year.
- A1 July 2024
- B1 October 2024
- C1 April 2025Correct
- D1 April 2026
Explanation
An asset remaining sub-standard for 12 months is classified as doubtful. 12 months from 1 April 2024 is 1 April 2025. The six-month and three-year options do not match the rule.
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