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Consider the following pairings of Non-Performing Assets (NPA) classification in India with their descriptions:

1. Substandard assets : Assets which have remained NPAs for a period less than or equal to 12 months.

2. Doubtful assets : Assets which have remained in the substandard category for a period of 12 months.

3. Loss assets : Assets which are considered uncollectible and of such little value that their continuance as a bankable asset is not warranted, although there may be some salvage or recovery value.

Which out of the above pairings are correct?


1. Only 1 and 2
2. Only 2 and 3
3. Only 1 and 3
4. 1, 2 and 3

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Correct Answer - Option 4 : 1, 2 and 3

The correct answer is 1, 2 and 3.

  • A non-performing asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.
    • A loan is in arrears when principal or interest payments are late or missed. A loan is in default when the lender considers the loan agreement to be broken and the debtor is unable to meet his obligations.
  • Banks are required to classify NPAs further into Substandard, Doubtful, and Loss assets, depending on the length of time overdue and probability of repayment.
    1. Substandard assets: Assets which has remained NPA for a period less than or equal to 12 months. Hence 1 statement is correct.
    2. Doubtful assets: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. Hence 2 statement is correct.
    3. Loss assets: As per RBI, “Loss asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted, although there may be some salvage or recovery value”. Hence 3 statement is correct.

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