What are NPA Norms as Per  RBI Guideline?

Classification of NPA: An asset is classified as an NPA based on the period for which the borrower has not made the required interest and/or principal payments. 

The asset is classified into three categories:

Substandard Asset: NPA for 90 days or more.

Doubtful Asset: An asset remains substandard for more than 12 months.

Loss Asset: The asset is considered uncollectible and is identified as a loss by the bank or internal/external auditors or RBI inspection.

Income Recognition and Asset Classification (IRAC) norms: These norms dictate how banks should treat income from NPAs. Interest income on NPAs should not be recognized unless it is realized. Additionally, the classification of assets should be based on the record of recovery, not just documentation.

Provisioning for NPAs: Banks are required to set aside funds as provisions based on the classification of the NPA. The idea is to create a buffer against potential losses due to NPAs. Higher provisioning is required for assets classified as doubtful or lost.

Restructuring of Advances: The RBI issues guidelines on the restructuring of advances to provide relief to borrowers facing temporary financial difficulties. This is done to prevent assets from becoming NPAs. However, such restructuring should be done transparently and as per RBI's guidelines.

Asset Quality Review (AQR): RBI conducts AQRs to assess the asset quality of banks more accurately. It is a process of thorough scrutiny and recognition of NPAs that might have been underreported.

Prompt Corrective Action (PCA): RBI imposes PCA on banks with a high level of NPAs to bring about corrective measures and prevent the situation from deteriorating further.

It's important to note that RBI may revise its guidelines and norms from time to time, so it is always best to refer to the latest circulars and notifications issued by the RBI for the most up-to-date information on NPA norms.