New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    In respect of an Overdraft/Cash Credit (OD/CC), when is

    the advance treated as NPA?
    A When the account remains 'out of order' Correct Answer Incorrect Answer
    B When the account is classified as 'standard' Correct Answer Incorrect Answer
    C When the account has a sufficient credit balance Correct Answer Incorrect Answer
    D When the account is government-guaranteed Correct Answer Incorrect Answer
    E When the account is secured by collateral Correct Answer Incorrect Answer

    Solution

    Overdraft/Cash Credit (OD/CC) facility is considered as Non-Performing Asset (NPA) when the account remains 'out of order'. An account is considered 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit or drawing power, whichever is lower, for 90 days or more. In other words, if the borrower exceeds the authorized credit limit or fails to maintain the required balance in the account, the account is considered 'out of order' and the advance is treated as an NPA.

    Practice Next

    Relevant for Exams: