CLASSIFICATION OF BANK ADVANCE ON BASIS OF PERFORMANCE

On the basis of performance bank advance divided into two categories. One is performing assets and another is non-performing assets. Performing assets means an asset from which income is generating. On the other hand non-performing asset means an asset from which income is not generating. Further performing and non-performing assets are also sub-divided.

Performing asset is known as standard asset. Whereas non-performing asset is divided into three categories:-

1.       Sub-standard assets.

2.       Doubtful assets.

3.       Loss assets.

Standard Assets:

                                 Standard assets are those assets which are regularly generating income and which do not carry more than normal risk attached to the business.

Sub-Standard Assets:

                                         A sub-standard asset is one which has been classified as non-performing assets for a period not exceeding 12 months. The current net worth of the borrower/guarantor or the current market value of the security charged is not enough to ensure recovery of the dues to the bank in full.

Doubtful Assets:

                                 An asset would be classified as doubtful if it has remained in the sub-standard category for a period of at least 12 months.

Loss Assets:

                        A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspectors but the amount has not been written off, wholly or partly.

Provisioning norms of various assets as directed by RBI:

Standard Assets:

1.       Direct advance to agricultural and small and Micro Enterprises (SMEs) sectors at .25%.

2.       Advance to commercial Real Estate (CRE) sector at 1.00%.

3.       Advances to commercial Real Estate- Residential Housing Sector (CRE-RH) at .75%.

4.       Housing loans extended at lesser rates-2%. The provisioning on these assets would revert to .40% after 1 year from the date on which the rates are reset at higher rates if the accounts remain standard.

5.       Restructured accounts classified as standard advance will attract a higher provision 5%.

1.       Secured Exposures                                                                      15%

2.       Unsecured Exposures                                                                  25%

3.       Unsecured exposure in respect                                                    20%

Of infrastructure loan accounts

Where certain safeguard such

As escrow accounts are available

Doubtful Advances:

1.       Unsecured portion                                                                       100%

2.       Secured portion

1.       Doubtful upto 1 year                                                  25%

2.       Doubtful> 1 year and upto 3 year                              40%

3.       Doubtful>3 year                                                        100%

Loss Asset:                                                                                  100%