As per RBI’s income recognition policy, under what

Solution

According to RBI’s income recognition and asset classification (IRAC) norms, interest on loans and advances against fully secured instruments like Term Deposits, NSCs, KVPs, and life insurance policies can be recognized as income on the due date only when: • The borrower maintains an adequate margin in the account, ensuring that the value of the security sufficiently covers the advance. • This protects the bank from credit risk while allowing recognition of income. • If the margin is inadequate, the bank cannot transfer the accrued interest to the income account. Thus, recognition of interest depends on the adequacy of margin, not merely the due date or borrower consent.