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      Question

      Under Section 2(1)(o) of the SARFAESI Act, a

      'non-performing asset' is an asset or account of a borrower classified by a bank or financial institution as which of the following?
      A Standard asset only Correct Answer Incorrect Answer
      B Special mention account or watchlist account Correct Answer Incorrect Answer
      C Sub-standard, doubtful or loss asset Correct Answer Incorrect Answer
      D Stressed asset as declared by RBI Correct Answer Incorrect Answer
      E Overdue account exceeding 180 days Correct Answer Incorrect Answer

      Solution

      Section 2(1)(o) defines 'non-performing asset' (NPA) as an asset or account of a borrower which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with directions or guidelines relating to asset classification issued by the RBI (or by the relevant regulatory authority). The definition specifically covers three categories: sub-standard, doubtful, and loss assets. 'Standard assets' and 'special mention accounts' (SMA) are not NPAs for SARFAESI purposes. Classification as NPA is the prerequisite trigger for the bank to issue the 60-day notice under Section 13(2).

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