Economics • Banking & FinanceMedium
In the context of Indian banking regulations, what does the term 'Non-Performing Asset' signify for a scheduled commercial bank?
A. Loans or advances where interest or principal installments remain overdue for a period exceeding 90 days.✓ Correct Answer
B. Government securities that have defaulted on coupon payments due to sovereign insolvency.
C. Foreign currency assets held abroad that fail to generate interest income because of exchange rate fluctuations.
D. Internal operational infrastructure investments that generate negative returns over three consecutive fiscal years.
💡 Solution & Explanation
An asset becomes a non-performing asset when the borrower fails to service interest or principal repayments for more than 90 days for term loans. Alternative definitions apply to sovereign debt or internal physical capital which do not conform to banking classification norms. Timely recognition of these assets is vital for maintaining banking sector health and provisioning accuracy.
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