Question

Q. Which of the following statements related to NPAs is incorrect?

• A. A non-performing asset (NPA) is a loan or advance for which the principal or interest payment has remained overdue for a period of 90 days.
• B. NPA’s are classified as Substandard, Doubtful, and Loss assets.
• C. The Gross NPAs of PSBs have consistently increased in the last decade.
• D. Both (a) and (c)

Answer 1

The correct option is C The Gross NPAs of PSBs have consistently increased in the last decade.

Explanation:

• In the case of a term loan, if the payment/repayment remains overdue for a period of greater than 90 days, it will be considered as an NPA.
• In the case of agriculture loans, if the payment/repayment has remained overdue for a period greater than two or one crop season from the due date, in the case of short-term and long-term loans respectively.
• Based on duration, they are further classified as Substandard, Doubtful, and Loss-making.
• The trends in the Gross NPA have been uneven. Despite the rise of NPAs in the early part of the decade, Gross non-performing assets (NPAs) of public sector banks (PSBs) declined from ₹8.96 lakh crore in March 2018 to ₹6.09 lakh crore in September 2020. However, the recent stress tests do indicate a possible rise in Gross NPA due to COVID-19.