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Question

When can interest realized on NPAs be taken to the income account?

A Only if the borrower agrees to make additional credit facilities available Correct Answer Incorrect Answer
B Only if the interest is recovered from the borrower's fresh credit facilities Correct Answer Incorrect Answer
C Only if the NPAs are secured against gold ornaments and jewelry Correct Answer Incorrect Answer
D Only if the interest is not out of fresh or additional credit facilities sanctioned to the borrower Correct Answer Incorrect Answer
E Only if the interest is recovered within the same accounting period Correct Answer Incorrect Answer

Solution

According to the given information, interest realized on NPAs (non-performing assets) can be taken to the income account, but it should not be out of fresh or additional credit facilities sanctioned to the borrower. This means that the interest should not be recovered from new loans or credit extended to the borrower.

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