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Question

Interest on performing assets should be recognized on ___________ basis.

A
actually received
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B
standard
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C
accrual
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D
None of these
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Solution

The correct option is C accrual
Banks are to recognize their income on accrual basis in respect of income on performing assets and on cash basis in respect of income on non-performing assets (NPA). Any interest accrued and credited to income account must be cancelled by a reverse entry once the credit facility comes under the category of NPAs.

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