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CMA Final · Corporate Financial Reporting · NBFCs - Provisioning Norms, Accounting and Reporting

A non-deposit taking NBFC applies these IRACP provisioning rates: standard assets 0.40%; sub-standard assets 10%; doubtful assets up to one year 100% of the unsecured portion plus 20% of the secured portion; loss assets 100%. Its book: standard assets Rs 1,000 lakh; sub-standard Rs 200 lakh; doubtful (up to one year) Rs 100 lakh outstanding with security realisable at Rs 60 lakh; loss assets Rs 10 lakh. What is the total provision required?

The total provision is Rs 86 lakh: Rs 4 lakh on standard assets, Rs 20 lakh on sub-standard, Rs 52 lakh on doubtful assets (Rs 40 lakh unsecured plus Rs 12 lakh on the secured part) and Rs 10 lakh on loss assets.

  1. ARs 86 lakhCorrect
  2. BRs 82 lakh
  3. CRs 84.5 lakh
  4. DRs 54 lakh

Explanation

Standard: 1,000 x 0.40% = 4. Sub-standard: 200 x 10% = 20. Doubtful: unsecured 40 x 100% = 40 plus secured 60 x 20% = 12, total 52. Loss: 10. Sum = 4 + 20 + 52 + 10 = Rs 86 lakh. Rs 82 lakh omits the standard-asset provision; Rs 54 lakh wrongly applies only 20% to the whole doubtful balance.

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