Module: | Capital Adequacy, Basel Norms & Monetary Policy
Q29: Which of the following statements regarding Asset Classification norms and definitions are correct?
1. A "Substandard Asset" is one that has remained NPA for a period less than or equal to 12 months.
2. An exposure is defined as "unsecured" if the realisable value of the security is not more than 10 percent of the outstanding exposure.
3. The RBI's system-based asset classification norms apply only to corporate loans above ₹5 crore.
4. "Loss assets" are those considered uncollectible and of such little value that their continuance as a bankable asset is not warranted.
Which of the statements given above is/are correct?
2. An exposure is defined as "unsecured" if the realisable value of the security is not more than 10 percent of the outstanding exposure.
3. The RBI's system-based asset classification norms apply only to corporate loans above ₹5 crore.
4. "Loss assets" are those considered uncollectible and of such little value that their continuance as a bankable asset is not warranted.
Which of the statements given above is/are correct?
✅ Correct Answer: B
The correct answer is B. Statement 1 is correct: By definition, a Substandard Asset is one that has remained non-performing for a period less than or equal to 12 months.
Statement 2 is correct: Under RBI prudential norms, an exposure is strictly defined as "unsecured" if the realisable value of the underlying security is not more than 10 percent of the outstanding exposure.
Statement 4 is correct: It represents the standard regulatory definition of a Loss Asset.
Statement 3 is incorrect: RBI's system-based asset classification norms are mandatory for all borrowal accounts across the bank, not restricted merely to corporate loans above ₹5 crore.
Statement 2 is correct: Under RBI prudential norms, an exposure is strictly defined as "unsecured" if the realisable value of the underlying security is not more than 10 percent of the outstanding exposure.
Statement 4 is correct: It represents the standard regulatory definition of a Loss Asset.
Statement 3 is incorrect: RBI's system-based asset classification norms are mandatory for all borrowal accounts across the bank, not restricted merely to corporate loans above ₹5 crore.