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

Meera Traders has a crop-unrelated short-duration working capital loan from a bank. Which of the following ideas correctly reflects the RBI classification norm on an account that is NPA, for example a loss asset?

A loss asset is an NPA where the loss has been identified by the bank, its auditors or RBI inspection but the amount has not been written off fully or partly. It is considered uncollectible and of such little value that continuing it as a bankable asset is not warranted.

  1. AA loss asset is one where loss has been identified by the bank, internal or external auditors or RBI inspection, but the amount has not been fully written offCorrect
  2. BA loss asset is any account overdue for more than 30 days
  3. CA loss asset is an asset kept at standard status with 100 percent provision
  4. DA loss asset is an account that has been upgraded after full recovery

Explanation

RBI defines a loss asset as one where loss has been identified by the bank or its internal or external auditors or by RBI inspection but the amount has not been written off wholly or partly. The 30-day option confuses it with early stress recognition. Standard assets are not loss assets.

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