How much provision is required for an asset which is

Solution

Doubtful assets

• 100 percent of the extent to which the advance is not covered by the realisable value of the security to which the bank has a valid recourse and the realisable value is estimated on a realistic basis.
• In regard to the secured portion, provision may be made on the following basis, at the rates ranging from 25 percent to 100 percent of the secured portion depending upon the period for which the asset has remained doubtful:

Period for which the advance has remained in ‘doubtful’ category

Provisioning requirement (%) Up to one year

25 One to three years

40 More than three years

100