CMA Final · Corporate Financial Reporting · NBFCs - Provisioning Norms, Accounting and Reporting
An NBFC has a loan outstanding of Rs 100 lakh that has been classified as doubtful for less than one year. The realisable value of the security is Rs 60 lakh. Under IRACP norms, what total provision is required?
The required provision is Rs 52 lakh. The unsecured portion of Rs 40 lakh must be fully provided. The secured portion of Rs 60 lakh carries 20% for a doubtful asset up to one year, which adds Rs 12 lakh.
- ARs 52 lakhCorrect
- BRs 40 lakh
- CRs 20 lakh
- DRs 100 lakh
Explanation
The unsecured portion is Rs 100 lakh minus Rs 60 lakh, which is Rs 40 lakh, and it is provided at 100%. The secured portion of Rs 60 lakh attracts 20% for a doubtful asset up to one year, which is Rs 12 lakh. The total is Rs 52 lakh. Rs 40 lakh ignores the provision on the secured portion.
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