A STUDY OF THIS UNIT WILL HELP THE LEARNER TO KNOW THE GUIDELINES ON :
CLASSIFICATION OF ASSESTS
INCOME RECOGNITION
PROVISIONING NORMS
OBJECTIVES
IN LINE WITH INTERNATIONAL PRACTICES AS PER THERECOMMENDATIONS MADE BY THE
‘COMMITTEE
ON THEFINANCIAL
SYSTEM’,
THE RBI OF INDIA HAS INTRODUCED ,IN A PHASED MANNER, PRUDENTIAL NORMS FOR
INCOME RECOGNITION
ASSEST CLASSIFICATION
PROVISIONING FOR THE ADVANCES PORTFOLIO OF BANKSSO AS TO MOVE TOWARDS GREATER CONSISTENCY ANDTRANSPARENCY IN THE PUBLISHED ACCOUNTS
INTRODUCTION
NON-PERFORMING ASSESTS (NPA): An asset including a leased asset, becomes an NPA when itceases to generate income for the bank. An NPA is a loan or anadvance where:
The interest and/or instalment of principal remain overdue fora period of more than ninety days in respect of a term loan.
An account remains
‘out
of orders, in respect of an overdraft/cash credit( OD/CC).
A bill remains overdue for a period of more than ninety days ,in the case of bills purchased and discounted.
An instalment of the principal or the interest thereon remainsoverdue for two crop seasons for short duration crops
An instalment of the principal or the interest thereon remainsoverdue for one crop season for long duration crops.
DEFINITION
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