The Reserve Bank of India (RBI) has guidelines in place for identifying and dealing with Non-Performing Assets (NPAs) by banks. Here’s a summary of the key points:
NPA Classification:
Generally, a loan is classified as NPA if interest and/or principal remain overdue for more than 90 days for term loans and the account remains ‘out of order’ for more than 90 days for overdrafts/cash credit accounts. [RBI]
Exceptions:
For some specific categories like small loans and loans to certain types of banks, a longer overdue period (180 days) might apply. [RBI]
Loans granted for agriculture are assessed based on crop cycles. A loan is NPA if dues are overdue for two crop seasons (short duration crops) or one season (long duration crops). [RBI]
Provisioning:
Banks are required to set aside provisions for NPAs to manage potential losses. The specific provisioning requirements vary depending on the NPA category. [RBI]
These are some of the main points of the RBI’s NPA guidelines. You can find the detailed guidelines on the RBI website [RBI].
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