{"id":2615,"date":"2019-10-20T12:41:49","date_gmt":"2019-10-20T12:41:49","guid":{"rendered":"https:\/\/commerceiets.com\/?p=2615"},"modified":"2019-10-20T12:41:49","modified_gmt":"2019-10-20T12:41:49","slug":"asset-classification-of-banking-company","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/asset-classification-of-banking-company\/","title":{"rendered":"ASSET CLASSIFICATION OF BANKING COMPANY"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/asset-classification-of-banking-company\/#ASSET_CLASSIFICATION_OF_BANKING_COMPANY\" title=\"ASSET CLASSIFICATION OF BANKING COMPANY\">ASSET CLASSIFICATION OF BANKING COMPANY<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/asset-classification-of-banking-company\/#STANDARD_ASSETS\" title=\"STANDARD ASSETS\">STANDARD ASSETS<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/commerceiets.com\/asset-classification-of-banking-company\/#NON-PERFORMING_ASSETS\" title=\"NON-PERFORMING ASSETS\">NON-PERFORMING ASSETS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/commerceiets.com\/asset-classification-of-banking-company\/#SUB-STANDARD_ASSETS\" title=\"SUB-STANDARD ASSETS\">SUB-STANDARD ASSETS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/commerceiets.com\/asset-classification-of-banking-company\/#DOUBTFUL_ASSETS\" title=\"DOUBTFUL ASSETS\">DOUBTFUL ASSETS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/commerceiets.com\/asset-classification-of-banking-company\/#LOSS_ASSETS\" title=\"LOSS ASSETS\">LOSS ASSETS<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/commerceiets.com\/asset-classification-of-banking-company\/#INCOME_RECOGNITION_NORMS\" title=\"INCOME RECOGNITION NORMS\">INCOME RECOGNITION NORMS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/commerceiets.com\/asset-classification-of-banking-company\/#PROVISIONING_NORMS\" title=\"PROVISIONING NORMS\">PROVISIONING NORMS<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"has-text-align-center wp-block-heading\"><span class=\"ez-toc-section\" id=\"ASSET_CLASSIFICATION_OF_BANKING_COMPANY\"><\/span>ASSET CLASSIFICATION OF BANKING COMPANY<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"has-medium-font-size\">Assets are the property that banking company owns. Asset classification of <a href=\"https:\/\/commerceiets.com\/provisions-of-banking-regulation-act-1949\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"banking company (opens in a new tab)\">banking company<\/a> is done as follows:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"960\" height=\"720\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/10\/Slide1-4.jpg\" alt=\"asset classification of banking company\n\" class=\"wp-image-2617\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/10\/Slide1-4.jpg 960w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/10\/Slide1-4-300x225.jpg 300w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/10\/Slide1-4-768x576.jpg 768w\" sizes=\"(max-width: 960px) 100vw, 960px\" \/><\/figure>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\"><span class=\"ez-toc-section\" id=\"STANDARD_ASSETS\"><\/span>STANDARD ASSETS<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"has-medium-font-size\">These assets do not carry more than normal risk which is\nattached to the business and does not constitute any problem. These are not\nnon-performing assets.<\/p>\n\n\n\n<h4 class=\"has-text-align-center wp-block-heading\"><span class=\"ez-toc-section\" id=\"NON-PERFORMING_ASSETS\"><\/span>NON-PERFORMING ASSETS<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">Non-performing assets are the assets that cease to generate\nany kind of income for the banking company. The assets are categorized as\nnon-performing by applying some standard norms. Non-performing asset is a loan\nor advance where:<\/p>\n\n\n\n<ul><li>Interest or installment of principal remain overdue for a period of more than 90 days in respect of term loan.<\/li><li>The amount remains \u2018out of order\u2019 in respect of overdraft or cash credit.<\/li><li>The bills remain overdue for a period of 90 days in the case of bills discounted or purchased.<\/li><li>The installment of principal or interest thereon remains overdue for a crop season for long duration crops.<\/li><li>The installments of principal or interest thereon remains overdue for one crop season for long duration crops.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\">The non-performing assets can be further classified into\nthree categories:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"SUB-STANDARD_ASSETS\"><\/span>SUB-STANDARD ASSETS<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">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.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"DOUBTFUL_ASSETS\"><\/span>DOUBTFUL ASSETS<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">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.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"LOSS_ASSETS\"><\/span>LOSS ASSETS<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">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.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\"><span class=\"ez-toc-section\" id=\"INCOME_RECOGNITION_NORMS\"><\/span>INCOME RECOGNITION NORMS<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul><li>The policy of income recognition has to be objective and it should be based on the record of the recovery. The banks should not charge and takes into account the income or interest on any non-performing asset.<\/li><li>Interest on advances against term deposits, national saving certificates etc. should be recognized on accrual basis.<\/li><li>Fees and commissions earned by the banks should be recognized on the accrual basis.<\/li><li>Government guaranteed advances if became non-performing asset, the interest on such advances should not be taken to income account unless the interest has been realized.<\/li><\/ul>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\"><span class=\"ez-toc-section\" id=\"PROVISIONING_NORMS\"><\/span>PROVISIONING NORMS<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"has-medium-font-size\">The provisioning norms regarding the assets identification\nas non-performing are as follows:<\/p>\n\n\n\n<ul><li>The statutory auditors and bank management have the primary responsibility for making provisions or any decrease or dimunition in the value of loan assets, investments or other assets.<\/li><li>Inspecting officer of RBI assist the bank management and statutory auditors in making decisions regarding provisions.<\/li><li>Provision for non-performing assets are to be made on the basis of classification of assets in conformity with prudential norms.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Also study:&nbsp;<\/strong><\/td><td><strong>Also study:&nbsp;<\/strong><\/td><td><strong>Also study:&nbsp;<\/strong><\/td><td><strong>Also study:&nbsp;<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/joint-stock-company\/\">Meaning of company<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/types-of-companies\/\">Types of companies<\/a><\/td><td><a href=\"http:\/\/v\" target=\"_blank\">One person company<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-public-and-private-company\/\">Public VS Private Company<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/sweat-equity-shares\/\">Sweat Equity Shares<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/stock-and-shares\/\">Stock vs Shares<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/reserve-capital-and-capital-reserve\/\">Reserve Capital Vs Reserve Capital<\/a><\/td><td><a href=\"http:\/\/v\" target=\"_blank\">Different types of preference shares<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/different-types-of-preference-shares\/\">Equity vs Preference shares<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/slip-system-of-posting\/\">Slip System of Posting<\/a><\/td><td><a href=\"http:\/\/v\" target=\"_blank\">Redemption of preference shares<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/buy-back-of-shares\/\">Buy Back of shares<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/debentures\/\">Debentures<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/issue-of-debentures\/\">Issue of debentures<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/redemption-of-debentures\/\">Redemption of Debentures<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/sources-of-redemption-of-debentures\/\">Sources of redemption of debentures<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/balance-sheet-as-per-companies-act-2013\/\">Balance Sheet as per Companies Act 2013<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/divisible-profits\/\">Divisible Profits<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/amalgamation\/\">Amalgamation<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/purchase-consideration\/\">Purchase consideration<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/alteration-of-share-capital\/\">Alteration of share capital<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/internal-reconstruction\/\">Internal Reconstruction<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/provisions-of-banking-regulation-act-1949\/\">Provision of banking regulation act 1949<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/asset-classification-of-banking-company\/\">Asset classification of banking company<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/non-performing-assets\/\">Non-performing assets<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/advances-in-banking-company\/\">Advances in banking company<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/types-of-life-insurance-policies\/\">Life Insurance Accounting<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/valuation-balance-sheet\/\">Valuation balance sheet<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/financial-statements-of-life-insurance-business\/\">Financial statements of life insurance companies<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/final-accounts-of-general-insurance-companies\/\">Final accounts of general insurance companies<\/a><\/td><td><\/td><td><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>CONNECT ON LINKEDIN<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/\" target=\"_blank\" rel=\"noopener\">https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>ASSET CLASSIFICATION OF BANKING COMPANY Assets are the property that banking company owns. Asset classification of banking company is done as follows: STANDARD ASSETS These assets do not carry more than normal risk which is attached to the business and does not constitute any problem. These are not non-performing assets. NON-PERFORMING ASSETS Non-performing assets are&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/asset-classification-of-banking-company\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;ASSET CLASSIFICATION OF BANKING COMPANY&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":2616,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[102],"tags":[180,181],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/2615"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=2615"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/2615\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/2616"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=2615"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=2615"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=2615"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}