Economics • Banking & FinanceMedium
In the context of asset classification by banks, what defines a 'Sub-Standard Asset' under Reserve Bank of India (RBI) guidelines?
A. An asset that has remained a non-performing asset (NPA) for a period less than or equal to 12 months.✓ Correct Answer
B. An asset that has remained doubtful for a period exceeding 3 years.
C. An asset where loss has been identified by the bank or internal auditors but the amount has not been written off.
D. An asset with overdue payments ranging between 30 and 60 days.
💡 Solution & Explanation
Under Reserve Bank of India prudential norms, an asset is classified as a sub-standard asset if it has remained a non-performing asset for a period less than or equal to 12 months, indicating a distinct credit weakness that jeopardizes loan recovery. Assets remaining in the doubtful category for over three years are eventually moved to the loss asset classification.
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