Examine the regulatory guidelines governing Non-Performing Assets (NPAs) in the Indian banking sector. When does a term loan credit facility get classified as a 'Doubtful Asset' by commercial banks under prudential norms?

💡 Solution & Explanation

Under Reserve Bank of India prudential norms, an asset is classified as sub-standard if it remained overdue for a period exceeding 90 days. If the asset remains in the sub-standard category for a period of 12 months, it is reclassified as a doubtful asset. Loss assets are those where loss has been identified by the bank or internal auditors but amount has not been written off fully. Asset classification is critical for determining provisioning requirements and maintaining bank financial health.