Non-performing assets are the assets that cease to generate any kind of income for the banking company. The assets are categorized as non-performing by applying some standard norms. Non-performing asset is a loan or advance where:

  • Interest or installment of principal remain overdue for a period of more than 90 days in respect of term loan.
  • The amount remains ‘out of order’ in respect of overdraft or cash credit.
  • The bills remain overdue for a period of 90 days in the case of bills discounted or purchased.
  • The installment of principal or interest thereon remains overdue for a crop season for long duration crops.
  • The installments of principal or interest thereon remains overdue for one crop season for long duration crops.

The non-performing assets can be further classified into three categories:

SUB-STANDARD ASSETS: A substandard asset would be one which has remained Non-performing asset for a period of more than or equal to 12 months. Sub-standard assets are the assets which have well defined credit weaknesses that jeopardize the liquidation of the debt and indicate that the banks will sustain loss in case deficiencies are not corrected.

DOUBTFUL ASSETS: An asset would be classified as doubtful if it has remained in the sub-standard category for a period of 12 months. These assets have the probability of not getting encashed.

LOSS ASSETS: A loss asset is one where loss has been identified by the bank or internal or external auditors or by RBI inspection. But these assets are not allowed to get written off completely.



Loss assets should be written off. If loss assets are permitted to remain in the books for any reason, 100% of the outstanding should be provided for.


100% of the extent to which the advance is not covered by realizable value estimated on realistic basis.

In regard to the secured portion, the provision made as:

Period for which the advance has remained in the doubtful category Provision required
Upto one year 25%
One to three years 40%
More than three years 100%


A general provision of 15% on the total outstanding should be made without making any allowance for guarantee cover and securities available.

The ‘unsecured exposures’ which are identified as sub-standard would attract additional provision of 10% i.e. a total of 25% on the outstanding balance. Unsecured Exposures are those exposures where the realizable value of the security is not more than 10% as assessed by the RBI.

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