How are Non-Performing Assets officially classified by commercial banks if a borrower fails to make interest or principal payments for a period exceeding ninety days?

💡 Solution & Explanation

An asset becomes a non-performing asset when it ceases to generate income for the bank, specifically when interest or principal installments remain overdue for more than ninety days for term loans. Sub-standard assets are those classified as non-performing for a period not exceeding twelve months. Doubtful assets remain in the non-performing category for more than twelve months. Loss assets are identified by auditors or internal inspectors as uncollectible with little salvage value, requiring full provisioning.