NPA & SARFAESI — Set 3
Banking · NPA और SARFAESI · Questions 21–30 of 80
Which committee's recommendations led to the implementation of NPA classification norms in India?
Correct Answer: C. Narasimham Committee
The Narasimham Committee on Financial System introduced the concept of income recognition and asset classification. This brought Indian banking standards closer to international Basel norms. It aimed to make the banking sector more transparent and accountable.
Which of the following is considered a 'Qualitative' reason for an account becoming an NPA?
Correct Answer: A. Diverting funds for purposes other than the stated project
Diversion of funds is a qualitative factor that indicates a high risk of default. Even if payments are currently being made, such behavior triggers bank concern. It is often a precursor to financial distress or willful default.
What is the full form of DRAT in the context of debt recovery?
Correct Answer: D. Debt Recovery Appellate Tribunal
DRAT stands for Debt Recovery Appellate Tribunal. It is the higher authority that hears appeals against the orders passed by the DRT. It ensures a multi-tier judicial review system for recovery disputes.
The term 'Sub-standard', 'Doubtful', and 'Loss' are used for the classification of?
Correct Answer: D. Non-Performing Assets
These terms are specific categories used to classify NPAs based on their age and recovery prospects. Standard assets are those performing well, while the others indicate varying degrees of stress. Accurate classification is vital for calculating a bank's capital adequacy.
What is the maximum time a bank can wait before classifying a sub-standard asset as a doubtful asset?
Correct Answer: A. 12 months
An asset transitions from sub-standard to doubtful after it has remained sub-standard for 12 months. This classification shift requires the bank to increase its provisions significantly. This time-based system reflects the eroding value of the collateral over time.
The SARFAESI Act allows banks to sell the assets of a defaulter through?
Correct Answer: A. Public auction or private treaty
Banks can recover dues by selling the secured assets through public auctions or private negotiations. This process allows for a faster recovery compared to lengthy litigation. It is one of the most powerful tools available to secured creditors.
Which of the following is NOT a method of debt recovery for banks?
Correct Answer: B. Directly seizing any property without notice
Banks cannot seize property without following due legal process and giving proper notice. Lok Adalats, SARFAESI, and DRTs are all legitimate, legally mandated recovery methods. Unauthorized seizure is illegal and can lead to legal action against the bank.
What is the full form of OTR in the context of managing stressed loans?
Correct Answer: D. One-Time Restructuring
OTR stands for One-Time Restructuring. It allows banks to modify the terms of a loan (like increasing the tenure) to help borrowers in temporary distress. This scheme was prominently used to support businesses during the pandemic crisis.
A loan where the interest and/or installment of principal remain overdue for two harvest seasons is known as an NPA in which sector?
Correct Answer: C. Agricultural sector
For agricultural loans, the NPA classification depends on the duration of crop seasons. A loan for short-duration crops becomes an NPA if it is overdue for two harvest seasons. This recognizes the cyclical nature of farm income.
The ratio of Gross NPA to Gross Advances is called?
Correct Answer: B. Gross NPA Ratio
The Gross NPA Ratio is a key indicator of a bank's asset quality. It shows the proportion of the total loan book that has become non-performing. A lower ratio indicates a healthier and more stable bank.