Question 1

What is the full form of NPA in the context of banking?

Accepted Answer

Non-Performing Asset. NPA stands for Non-Performing Asset. It refers to a loan or advance where the principal or interest payment remains overdue for a specific period. Generally, an asset is classified as NPA if the payment is overdue for more than 90 days.

Question 2

After how many days of being overdue is a standard loan typically classified as an NPA?

Accepted Answer

90 days. A loan becomes an NPA when payments are overdue for a period of 90 days. This 90-day norm is the standard criteria set by the central bank. It helps banks identify loans that are no longer generating income.

Question 3

What is the full form of the SARFAESI Act?

Accepted Answer

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest. The act is known as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. It was enacted in 2002 to help banks recover bad loans. It allows banks to auction properties when borrowers fail to repay their loans.

Question 4

In which year was the SARFAESI Act enacted in India?

Accepted Answer

2002. The SARFAESI Act was passed by the Indian Parliament in 2002. It was designed to provide a legal framework for banks to handle non-performing assets effectively. This act significantly reduced the need for court intervention in debt recovery.

Question 5

Which category of NPA is assigned to an asset that has remained in the NPA category for a period up to 12 months?

Accepted Answer

Sub-standard Asset. An asset is classified as a sub-standard asset if it remains an NPA for 12 months or less. In this category, the bank perceives a higher risk of loss. Proper provisioning is required for such assets as per regulatory guidelines.

NPA & SARFAESI — Set 1