2.6.2. Categories of NPAs

Standard asset – when borrower regularly pays his dues regularly and on time.

Banks are required to classify non •performing assets further into the following three categories based on the period for which the asset has remained non•performing and the realisability of the dues:

Special mention account – If the borrower does not pay for 90 days after end of a quarter; the loan becomes an NPA and it is termed as special mention account.

Sub•standard Assets - a sub•standard asset is one which has remained NPA for a period less than or equal to 12 months. Such an asset will have well defined credit weaknesses that jeopardise the liquidation of the debt and are characterised by the distinct possibility that the banks will sustain some loss, if deficiencies are not corrected.

Doubtful Assets - an asset is classified as doubtful if it has remained in the sub•standard category for a period of 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that were 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.

Loss Assets - A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly. In other

words, such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value.