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      Question

      The provisions on ________ assets should not be

      considered while arriving at net NPAs.
      A Sub-standard Correct Answer Incorrect Answer
      B Standard Correct Answer Incorrect Answer
      C Doubtful Correct Answer Incorrect Answer
      D Loss Correct Answer Incorrect Answer
      E Risky Correct Answer Incorrect Answer

      Solution

      • Net NPA (Non-Performing Assets) ratio is an important indicator of a bank’s asset quality and financial health. • It is calculated by deducting provisions made against NPAs from gross NPAs. • Importantly, provisions held for standard assets are not reckoned while computing net NPAs. • This is because standard assets are performing assets, and including them would distort the accuracy of the net NPA ratio. Thus, for calculating net NPAs, only provisions for actual NPAs (sub-standard, doubtful, and loss assets) are considered, while standard assets are excluded.

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