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

Under the RBI's prudential norms for NBFCs (Non-Banking Financial Company - Scale Based Regulation), an asset is classified as a sub-standard asset when it has remained a non-performing asset for a period:

A sub-standard asset is one that has remained non-performing for a period not exceeding 12 months. Once the asset stays NPA beyond 12 months, it is classified as doubtful, which attracts higher provisioning. Therefore the correct period is up to 12 months.

  1. Anot exceeding 12 monthsCorrect
  2. Bexceeding 12 months but not exceeding 24 months
  3. Cexceeding 24 months
  4. Dof more than 3 months only, with no upper limit

Explanation

Under the NBFC asset classification norms, a sub-standard asset is one that has remained NPA for a period not exceeding 12 months. An asset remaining sub-standard for more than 12 months is a doubtful asset. Hence the first option is right; the 12-24 month band is not the sub-standard period.

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