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CS Professional · Banking and Insurance - Laws and Practice · Performing and Non Performing Assets

A bank holds a term loan to Gupta Steels of Rs 10 crore. It was classified as NPA on 1 June 2023. Gupta Steels later pays all overdue interest and principal, so the account is fully regularised by the borrower. Which statement is correct under the RBI norms on upgradation?

The account can be upgraded to standard when all arrears of interest and principal are paid by the borrower. NPA status is not permanent and there is no automatic upgrade by time lapse or a fixed 12 month waiting period after full regularisation.

  1. AThe account can be upgraded to standard only if all arrears of interest and principal are paid by the borrowerCorrect
  2. BThe account must be upgraded automatically after 90 days
  3. CThe account stays NPA permanently once classified
  4. DThe account is upgraded only after 12 months of full repayment

Explanation

RBI norms allow an NPA account to be upgraded to standard only when all arrears of interest and principal are paid by the borrower. The 90-day automatic upgrade has no basis, and NPA status is not permanent. A 12 month waiting period is not required once arrears are cleared.

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