Question

    Which of the following bank-financed facilities is NOT

    classified as NPA even when other credit facilities of the same borrower are classified as NPA?
    A Term Loan Correct Answer Incorrect Answer
    B Overdraft Facility Correct Answer Incorrect Answer
    C Cash Credit Correct Answer Incorrect Answer
    D Bills Discounted against Accepted LC Correct Answer Incorrect Answer
    E Working Capital Demand Loan Correct Answer Incorrect Answer

    Solution

    Bills discounted under an Accepted Letter of Credit (LC) are not classified as NPA, even if other exposures to the same borrower are. This is because LCs provide a third-party payment guarantee.

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