Page 228 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 15: Management of NPAs by Banks

15.7 Self Assessment Notes

Fill in the blanks:
1. The assets which remained doubtful for a period of ……………. years required a provision
of 30%.
2. ………………should be written off.
3. Term Loan account will be treated as NPA if interest or installment of principal is in
arrears for any ………………out of four quarters.
4. A ………………………will be treated as NPA if the account remains out of order for a
period of two quarters.

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5. With effect from 31 March 2005, a ………………….would be one, which has
remained NPA for a period less than or equal to 12 months.
6. Lok Adalats are made for the recovery of small NPAs upto……………..

7. For claims below…………………, the banks and FIs can initiate proceedings under the
Code of Civil Procedure of 1908, as amended, in a Civil Court.
8. The ………………which are identified as ‘substandard’ would attract additional provision
of 10 per cent, i.e., a total of 20 per cent on the outstanding balance.
State whether the following statements are true or false:
9. Sub-standard assets remained NPA for a period less than or equal to 12 months.

10. Doubtful assets remained in the sub standard category for a period of 18 months.
11. Banks can make 50% provisions on loss assets.
12. The provisions towards Standard Assets need not be netted from gross advances.

13. Large amount of loans are the reasons of rising NPAs in banks.
14. CIBIL is India’s first credit information bureau.
15. CIBIL is a composite credit bureau.

15.8 Review Questions

1. The RBI has issued guidelines to banks for classification of assets into different categories.
What are those guidelines?
2. RBI is the key regulator of banking industry in India. Discuss the key measures taken by
RBI for regulating the banking sector.
3. “As per Reserve Bank of India’s guidelines, income on loans is to be recognised on receipt
basis (as against accrual basis) and if it has not been received for a specified period, the
same asset is to be treated as non-performing.” Discuss.
4. In recent years the NPAs are increasing with a rapid rate. Why?
5. Discuss the impact of NPAs on Indian banking industry.

6. Suppose you are the bank manager of HDFC bank and you have to take some necessary
steps to reduce the bank’s NPAs. What will be your action to reduce the NPAs?
7. Why it is important to control the rising of NPAs?

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