The bank extended loan of Rs.20 lakh to XYZ Ltd. The loan was to be repaid in 20 equal monthly instalments of Rs.1 lakh each starting from January 01, 2020. The company was unable to pay and the account was classified as NPA by the bank on April 01 2020. Which category of NPA will it be classified as on October 01, 2021?

NPA can be classified as sub-standard, doubtful or loss assets. · An asset would be classified as sub-standard if it remained NPA for a period less than or equal to 12 months . · An asset is required to be classified as doubtful, if it has remained NPA for more than 12 months. A loan classified as doubtful has all the weaknesses inherent as that classified as sub-standard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. It is called Doubtful 1 if it remains in doubtful category for upto 1 year, doubtful 2 between 1-3 years and doubtful 3 in case of beyond 3 years. · A loss asset is one where loss has been identified by the bank or internal or external auditors or by the Co-operation Department or by the Reserve Bank of India’s inspection but the amount has not been written off, wholly or partly. In other words, such an asset is considered un-collectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value.