Table of Contents
What are standard and sub-standard asset?
Standard asset for a bank is an asset that is not classified as an NPA. The asset exhibits no problem in the normal course other than the usual business risk. More specifically, according to RBI circular, sub-standard asset is an asset that has continued to remain an NPA for a period less than or equal to 1 year.
What is substandard doubtful and loss assets?
– Substandard asset- an asset classified as an NPA for less than a period of 12 months. – Doubtful asset – an asset that has been non-performing for more than a period of 12 months. – Loss assets – loans with losses that need to be fully written off. It is identified by the bank, auditor, or inspector.
What does substandard mean in banking?
Loan Classification Definitions. ▪ Substandard – Loans classified Substandard are. inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well defined weakness or weaknesses that jeopardize the liquidation of the debt.
When the account is sub-standard?
4.1.1 Sub-standard Assets A sub-standard asset was one, which was classified as NPA for a period not exceeding two years. With effect from 31 March 2001, a sub-standard asset is one, which has remained NPA for a period less than or equal to 18 months.
What is standard and substandard?
A standard is a quality by which something is judged, and sub can mean “under” like a submarine that goes under water. So things that are substandard fall below most people’s standards — they’re deficient in some way. A computer that stops working after two weeks is substandard. A car with faulty brakes is substandard.
What are the different classifications of assets?
Assets can be grouped into two major classes: tangible assets and intangible assets. Tangible assets contain various subclasses, including current assets and fixed assets. Current assets include inventory, accounts receivable, while fixed assets include buildings and equipment.
What is asset classification?
Asset classification is a system for assigning assets into groups, based on a number of common characteristics. Various accounting rules are then applied to each asset group within the asset classification system, to properly account for each one.
What are stressed assets?
When the asset is not performing because they become doubtful and NPAs from doubtful become bad loans. Before the period of 90 days, they are calledStressed Assets. Stressed assets= NPAs + restructured loans + Written Off Assets.
What is a classified asset?
Classified Assets means, at any particular time, all assets of Bank classified as “Loss,” “Doubtful,” or “Substandard” or in any equivalent category by Bank or any governmental or regulatory authority.
What happens if a loan is classified?
What Is a Classified Loan? A classified loan is a bank loan that is in danger of default. Classified loans have unpaid interest and principal outstanding, but don’t necessarily need to be past due. As such, it is unclear whether the bank will be able to recoup the loan proceeds from the borrower.
What does substandard mean in business?
Something substandard is below standard — it’s shoddy or inferior. Turning in substandard work is a good way to get a bad grade.
What’s the opposite of substandard?
Opposite of very poor or bad in standard or quality. good. excellent. fine. first-class.
What makes an asset a substandard asset?
A substandard asset would be one, which has remained NPA for a period less than or equal to 12 months. Such an asset will have well defined credit weaknesses that jeopardise the liquidation of the debt and are characterized by the distinct possibility that the banks will sustain some loss, if deficiencies are not corrected.
Can a substandard asset be classified as an NPA?
Such an asset should not be an NPA. A substandard asset would be one, which has remained NPA for a period less than or equal to 12 months.
When to write off a sub standard asset?
The bank has to make provision of 15% for sub-standard, 25% for secured portion during the first year and 40% for 2nd and 3rd years and write off the unsecured postion. After 3 years as doubtful, on becoming a loss asset, it is to be totally written off.
When does an asset become a doubtful asset?
Substandard Assets: A substandard asset is the one which has remained NPA for a period less than or equal to 12 months. Doubtful Assets: An asset is classified as doubtful if it has remained in the substandard category for a period of 12 months.