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      Question

      An asset would be classified as substandard if it has

      remained an NPA for a period:
      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

      An asset is classified as substandard if it has remained a Non-Performing Asset (NPA) for a period less than or equal to 12 months. This means that the borrower has failed to make the required principal and/or interest payments for up to 12 months. Substandard assets have well-defined credit weaknesses that pose a risk to the bank's ability to recover the debt. If these weaknesses are not corrected, the bank is likely to incur some loss.

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