Examine the regulatory guidelines concerning 'Non-Performing Assets (NPAs)' in Indian commercial banks. Under what condition is a credit facility classified as a 'Doubtful Asset'?

💡 Solution & Explanation

An asset is classified as doubtful if it has remained in the sub-standard category for a period exceeding 12 months, indicating a high probability of credit loss. Sub-standard assets are those which have remained an NPA for a period less than or equal to 12 months. Loss assets are those where loss has been identified by the bank or internal auditors, but the amount has not been written off entirely. Timely provisioning is mandatory for banks holding such impaired assets to maintain capital adequacy.