ABC bank has financed a term loan of ₹ 120 lakh to a Micro Small Enterprises unit, which was repayable in 60 monthly instalments of ₹ 2.00 lakh and Interest. The monthly instalments of ₹ 2.00 lakh plus interest from 15th

CS Professional · Banking - Law & Practice · PYQS · December 2019
ABC bank has financed a term loan of ₹ 120 lakh to a Micro Small Enterprises unit, which was repayable in 60 monthly instalments of ₹ 2.00 lakh and Interest. The monthly instalments of ₹ 2.00 lakh plus interest from 15th December, 2017 remained unpaid though the available security is more than the outstanding balance (₹ 80 lakhs). Explain the movement of Asset Classification of account and provision requirement (percentage and amount) as per RBI guidelines.

Answer & Explanation:

The instalments remained overdue from 15th December, 2017. Balance outstanding is ₹ 80 lakh as on the date of NPA. Outstanding is 100% secured by the asset charged to the bank. On the basis of record of recovery, the asset classification will be as under: Period Asset Classification Provision Norms as per RBI guidelines Provision Requirement 15th December, 2017 to 14th March, 2018 Standard (SMA-0, SMA-1, SMA-2) 0.25% ₹ 20000 15th March, 2018 to 14th March, 2019 Sub Standard 15% ₹ 12 lakh 15th March, 2019 to 14th March, 2020 Doubtful - Category -I 25% ₹ 20 lakh 15th March, 2020 to 14th March, 2022 Doubtful - Category - II 40% ₹ 32 lakh 15th March, 2022 onwards Doubtful - Category - III 100% ₹ 80 lakh

Topics: Asset Classification and Provisioning

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