In recent times, the Non-performing Assets or Bad loans are making news with reference to the banking industry in India. In this context, which among the following is / are classified as bad loans?
1. Special Mention Account
2. Sub-standard Assets
3. Doubtful assets
Select the correct option from the codes given below:

Answer: [D] 1, 2 & 3

  • If the borrower does not pay dues for 90 days after end of a quarter; the loan becomes an NPA and it is termed as “Special Mention Account”.
  • If a loan remains Special Mention Account for a period less than or equal to 12 months; it is termed as Sub-standard Asset.
  • If sub-standard asset remains so for a period of 12 more months; it would be termed as “Doubtful asset”. This remains so till end of 3rd year.
  • If the loan is not repaid even after it remains sub-standard asset for more than 3 years, it may be identified as unrecoverable by internal / external audit and it would be called loss asset. An NPA can declared loss only if it has been identified to be so by internal or external

This question is a part of GKToday's Integrated IAS General Studies Module