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    Question

    For how long must an asset remain a Non-Performing Asset

    (NPA) to be classified as a substandard asset?
    A Less than or equal to 6 months Correct Answer Incorrect Answer
    B Less than or equal to 9 months Correct Answer Incorrect Answer
    C Less than or equal to 12 months Correct Answer Incorrect Answer
    D Less than or equal to 18 months Correct Answer Incorrect Answer
    E Less than or equal to 24 months Correct Answer Incorrect Answer

    Solution

    • As per RBI’s prudential norms on income recognition, asset classification, and provisioning (IRACP): o An asset classified as NPA (where interest/principal has remained overdue for >90 days) is treated as substandard if it remains in the NPA category for up to 12 months. o Substandard assets indicate well-defined credit weaknesses that jeopardize recovery unless corrective action is taken. o Beyond 12 months in NPA status, the asset is reclassified as a doubtful asset. o If recovery is deemed practically impossible, it becomes a loss asset.

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