RAS question
An asset is classified as a Non-Performing Asset (NPA) if interest or principal remains overdue for how many days?
Correct answer: (B) 90 days.
A loan asset is classified as a Non-Performing Asset when interest or an instalment of principal remains overdue for more than 90 days.
Explanation
RBI's prudential norms define an NPA as a loan or advance where, for a term loan, interest and/or an instalment of principal remains overdue for more than 90 days. The rule is recovery-based: the account is judged by whether the borrower has serviced the dues within the specified period, not by a subjective view of the borrower. RBI also applies the same 90-day idea to certain other credit forms, such as overdue bills and liquidity facilities, while agricultural advances are linked to crop seasons instead of a simple day count. The standard banking threshold for NPA classification is therefore 90 days, making option B the only correct choice.
Why the other options are wrong
- (A) 60 days is too early for NPA classification under RBI prudential norms; it indicates a stressed account stage such as SMA-1, not the RBI's more-than-90-days NPA threshold.
- (C) 30 days is an early warning stage such as SMA-0, whereas RBI's NPA definition for a term loan requires interest or principal to remain overdue for more than 90 days.
- (D) 180 days overshoots the NPA trigger; RBI first treats the account as NPA after the more-than-90-days overdue point, and later categories depend on how long it remains non-performing.
Concept
Asset classification under RBI prudential norms is a core banking-sector concept. NPAs connect financial stability, bank balance sheets and credit discipline in the Indian economy syllabus for RAS.