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

Under the RBI's prudential framework for resolution of stressed assets, a resolution plan for an account is being implemented. Which condition is required for a loan to be treated as upgraded to standard after implementation?

A resolved account is upgraded to standard only after the borrower performs satisfactorily during the prescribed monitoring period, including the specified repayment of residual debt. Merely signing the plan, or the auditor's approval, does not upgrade the account.

  1. AThe account is upgraded immediately on signing the plan
  2. BThe borrower must perform satisfactorily during the specified monitoring period, with payments of at least 10 percent of residual debt as prescribedCorrect
  3. CThe account is upgraded once the bank's auditors approve it
  4. DThe account can never be upgraded after restructuring

Explanation

After implementation, the account stays in its classification until the borrower meets the specified performance condition during the monitoring period. Upgrade needs satisfactory performance, with the prescribed repayment of residual debt and no further default. Immediate upgrade on signing would hide the weakness.

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