Non-Performing Asset

✅ CHAPTER-WISE 100 IMPORTANT MCQs

CHAPTER 1 – NPA Definition, Overdue, Out of Order (10 MCQs)

1. A Term Loan becomes NPA when overdue for more than:
   A) 60 days
   B) 90 days
   C) 120 days
   D) 180 days
   Answer: B
2. Bills Purchased/Discounted become NPA after:
   A) 30 days
   B) 60 days
   C) 90 days
   D) 180 days
   Answer: C
3. An OD/CC account is classified NPA when it becomes:
   A) Excess
   B) Out of Order
   C) Frozen
   D) Overdrawn
   Answer: B
4. An OD/CC account is Out of Order when outstanding is:
   A) Above limit
   B) Above Drawing Power for 90 days
   C) Above Drawing Power for 30 days
   D) Above balance for 7 days
   Answer: B
5. If credits in OD/CC are not enough to cover interest for 90 days, the account becomes:
   A) SMA-1
   B) Standard
   C) Out of Order
   D) Closed
   Answer: C
6. An account not renewed within 180 days from due date becomes:
   A) Standard
   B) Technical NPA
   C) Restructured
   D) Closed
   Answer: B
7. Stock statements older than ___ days may lead to NPA if drawing is allowed above DP.
   A) 60
   B) 75
   C) 90
   D) 120
   Answer: C
8. Project loans become NPA if DCCO is delayed beyond:
   A) 6 months
   B) 12 months
   C) 1 or 2 years (as applicable)
   D) 3 years
   Answer: C
9. For infrastructure projects, DCCO extension allowed up to:
   A) 6 months
   B) 1 year
   C) 2 years
   D) 3 years
   Answer: C
10. For non-infrastructure projects, DCCO extension allowed up to:
    A) 1 year
    B) 2 years
    C) 3 years
    D) None
    Answer: A

CHAPTER 2 – Income Recognition (IRAC) Rules (10 MCQs)

11. Interest on NPAs must be:
    A) Applied regularly
    B) Reversed if not realized
    C) Treated as income
    D) Added to principal
    Answer: B
12. Further interest on NPAs should be recorded in:
    A) Loan Account
    B) Interest Suspense Account
    C) Memorandum Account
    D) Current Account
    Answer: C
13. Interest can continue to be booked on NPAs only when loan is backed by:
    A) Gold
    B) NSC/KVP/FD/LIC policy with margin
    C) House property
    D) Shares
    Answer: B
14. Recovery in NPA account should first be appropriated to:
    A) Principal
    B) Interest
    C) Charges/Costs
    D) Penal interest
    Answer: C
15. Accrued interest on NPAs must be:
    A) Written off
    B) Not booked as income
    C) Capitalized
    D) Deferred
    Answer: B
16. Penal interest in NPA accounts is recovered:
    A) First
    B) After normal interest
    C) After charges
    D) Along with principal
    Answer: B
17. Interest reversal is applicable for:
    A) Standard assets
    B) NPAs
    C) Performing loans
    D) New accounts
    Answer: B
18. Unrealized interest credited earlier must be:
    A) Added to principal
    B) Reversed
    C) Adjusted to OD limit
    D) Not touched
    Answer: B – Interest that has become due but has not yet been received or collected by the bank from the borrower
19. Income is recognized in NPAs only when:
    A) Charged
    B) Earned
    C) Realized
    D) Posted in system
    Answer: C
20. Memorandum interest is:
    A) Recognized income
    B) Not recognized income
    C) Penal interest
    D) Rebated
    Answer: B – Interest that is calculated for record / reference purposes but is NOT booked in the Profit & Loss account and NOT added to the borrower’s loan balance.
    

CHAPTER 3 – Asset Classification (Standard, Substandard, Doubtful, Loss) – 15 MCQs

21. A substandard asset is an asset which has remained NPA for:
    A) ≤ 6 months
    B) ≤ 12 months
    C) ≤ 24 months
    D) > 12 months
    Answer: B
22. A doubtful asset is one which remained substandard for more than:
    A) 6 months
    B) 12 months
    C) 24 months
    D) 36 months
    Answer: B
23. A loss asset is classified when security value is:
    A) < 50%
    B) < 30%
    C) < 20%
    D) < 10% of outstanding
    Answer: D
24. A loss asset is:
    A) Not realizable
    B) Doubtful
    C) Standard
    D) Overdue
    Answer: A
25. A loss asset must be:
    A) Retained
    B) Upgraded
    C) Written off or 100% provisioned
    D) Charged interest
    Answer: C
26. Asset classification is based on:
    A) Borrower-wise
    B) Facility-wise
    C) Loan-wise
    D) Product-wise
    Answer: A
27. If any facility becomes NPA, then:
    A) Only that loan is NPA
    B) All loans become NPA
    C) No loan becomes NPA
    D) Only secured loans become NPA
    Answer: B
28. Erosion of security below 50% leads to classification as:
    A) Substandard
    B) Doubtful
    C) Loss
    D) Standard
    Answer: B
29. Erosion of security below 10% leads to:
    A) Substandard
    B) Doubtful
    C) Loss asset
    D) Standard
    Answer: C
30. An NPA cannot be upgraded unless:
    A) Fully secured
    B) Entire overdue is cleared
    C) Restructured
    D) Interest paid only
    Answer: B
31. Bills overdue 90 days become:
    A) Standard
    B) Substandard
    C) Doubtful
    D) Loss
    Answer: B
32. Asset classification is done on:
    A) Monthly basis
    B) Day-end basis
    C) Quarterly basis
    D) Annual basis
    Answer: B
33. Upgradation from NPA to standard requires:
    A) Regularization
    B) Sanction letter
    C) New security
    D) Write-off
    Answer: A – Bringing an overdue / irregular / stressed loan account back to normal condition by clearing all overdue interest and installments.
34. Term Loan NPA classification is based on:
    A) Principal only
    B) Interest only
    C) Either principal or interest overdue >90 days
    D) Both overdue
    Answer: C
35. For OD/CC, classification depends on:
    A) Overdue days
    B) Out of Order status
    C) Interest unpaid
    D) Penal interest
    Answer: B

CHAPTER 4 – SMA Norms (10 MCQs)

36. SMA-0 overdue:
    A) 0–15 days
    B) 0–30 days
    C) 0–60 days
    D) 31–60 days
    Answer: B
37. SMA-1 overdue:
    A) 0–30 days
    B) 31–60 days
    C) 61–90 days
    D) >90 days
    Answer: B
38. SMA-2 overdue:
    A) 0–30
    B) 31–60
    C) 61–90
    D) >90
    Answer: C
39. SMA classification helps in:
    A) Computation of interest
    B) Early identification of stress
    C) Enhancing credit limits
    D) Auditing
    Answer: B
40. NPA classification is based on:
    A) SMA status
    B) Day-end positions
    C) Month-end balances
    D) Auditor’s report
    Answer: B
41. For CC/OD, SMA classification based on:
    A) Out of Order number of days
    B) Stock statement
    C) Limit expiry
    D) Renewal date
    Answer: A
42. SMA is applicable to:
    A) All standard accounts
    B) Only NPAs
    C) Written-off accounts
    D) Fully secured accounts
    Answer: A
43. Overdue days are counted from:
    A) Disbursement date
    B) Due date
    C) Sanction date
    D) Review date
    Answer: B
44. For term loans, SMA classification is based on:
    A) Principal only
    B) Interest only
    C) Overdue days of either principal/interest
    D) DP
    Answer: C
45. NPA occurs after SMA-2 when overdue crosses:
    A) 90 days
    B) 120 days
    C) 150 days
    D) 60 days
    Answer: A

CHAPTER 5 – Special Cases (10 MCQs)

46. Advances backed by term deposits/NSC/KVP do NOT become NPA if:
    A) Overdue
    B) Adequate margin exists
    C) Overdrawn
    D) Penal interest applied
    Answer: B
47. Central Government Guaranteed loans become NPA when:
    A) 90 days overdue
    B) Guarantee repudiated
    C) Documentation incomplete
    D) DP expired
    Answer: B
48. State Government Guaranteed loans become NPA when overdue for:
    A) 60 days
    B) 90 days
    C) 120 days
    D) Repudiation
    Answer: B
49. Credit card receivables NPA norm:
    A) 60 days
    B) 90 days
    C) 120 days
    D) 180 days
    Answer: B
50. Agricultural loans are classified based on:
    A) Crop season
    B) EMI date
    C) DP
    D) Bank policy
    Answer: A
51. For short-duration crops, loan becomes NPA after:
    A) 1 crop season
    B) 2 crop seasons
    C) 3 crop seasons
    D) 4 crop seasons
    Answer: B
52. For long-duration crops, NPA after:
    A) 1 crop season
    B) 2 crop seasons
    C) 3 crop seasons
    D) 4 crop seasons
    Answer: A
53. Restructured agri loans due to natural calamity need provision of:
    A) 0.40%
    B) 1%
    C) 5%
    D) 10%
    Answer: C
54. Erosion of security below 50% leads to classification as:
    A) Substandard
    B) Doubtful
    C) Loss
    D) Standard
    Answer: B – A situation where the value of the security (asset kept as collateral for a loan) falls significantly compared to the outstanding loan amount.
55. Erosion below 10% leads to:
    A) Doubtful
    B) Loss
    C) Substandard
    D) Standard
    Answer: B

CHAPTER 6 – Provisioning Norms (15 MCQs)

56. Provision for loss asset:
    A) 25%
    B) 40%
    C) 50%
    D) 100%
    Answer: D
57. Substandard asset provisioning:
    A) 5%
    B) 10%
    C) 15%
    D) 25%
    Answer: C
58. Substandard infrastructure with escrow:
    A) 15%
    B) 20%
    C) 25%
    D) 30%
    Answer: B
59. Doubtful up to 1 year – secured:
    A) 10%
    B) 25%
    C) 40%
    D) 100%
    Answer: B
60. Doubtful 1–3 years – secured:
    A) 25%
    B) 40%
    C) 60%
    D) 100%
    Answer: B
61. Doubtful >3 years – secured:
    A) 25%
    B) 50%
    C) 75%
    D) 100%
    Answer: D
62. Doubtful – unsecured portion:
    A) 25%
    B) 40%
    C) 75%
    D) 100%
    Answer: D
63. Provisioning is done on:
    A) Facility-wise
    B) Security-wise
    C) Asset-class-wise
    D) Income-wise
    Answer: C
64. Provisioning for standard assets – general:
    A) 0.25%
    B) 0.40%
    C) 0.75%
    D) 1%
    Answer: B
65. Standard agricultural loans:
    A) 0.25%
    B) 0.40%
    C) 0.75%
    D) 1%
    Answer: A
66. Standard MSME advances:
    A) 0.25%
    B) 0.40%
    C) 1%
    D) 3%
    Answer: A
67. Standard CRE loans:
    A) 0.40%
    B) 0.75%
    C) 1%
    D) 2%
    Answer: C
68. Standard CRE – Residential Housing:
    A) 0.40%
    B) 0.75%
    C) 1%
    D) 2%
    Answer: B
69. Standard Housing (Teaser rate):
    A) 0.40%
    B) 0.75%
    C) 1%
    D) 2%
    Answer: D
70. Restructured under natural calamities provision:
    A) 0.25%
    B) 1%
    C) 5%
    D) 10%
    Answer: C

CHAPTER 7 – Monitoring & Control of NPAs (10 MCQs)

71. PCR target recommended by RBI:
    A) 50%
    B) 60%
    C) 70%
    D) 90%
    Answer: C
72. PCR formula is:
    A) NPA / Provision
    B) Provision / Gross NPA
    C) Gross NPA / Net NPA
    D) Provision + GNPA
    Answer: B
73. Exposure ≥ ₹50 crore monitored by:
    A) COCC-CGM
    B) CACB
    C) Board Recovery Committee
    D) Branch Manager
    Answer: C
74. Exposure ₹25–50 crore monitored by:
    A) CACB
    B) COCC-ED
    C) COCC-CGM
    D) Zonal office
    Answer: A
75. Exposure ₹10–25 crore monitored by:
    A) COCC-ED
    B) COCC-CGM
    C) CACB
    D) Board
    Answer: A
76. Exposure ₹5–10 crore monitored by:
    A) COCC-CGM
    B) COCC-ED
    C) CACB
    D) RBI
    Answer: A
77. Security inspection ≥ ₹1 crore must be done:
    A) Monthly
    B) Quarterly
    C) Half-yearly
    D) Yearly
    Answer: C
78. Security inspection < ₹1 crore must be done:
    A) Monthly
    B) Quarterly
    C) Half-yearly
    D) Yearly
    Answer: D
79. Stock audit mandatory when WC limit ≥:
    A) ₹1 crore
    B) ₹2 crore
    C) ₹5 crore
    D) ₹10 crore
    Answer: C
80. Purpose of monitoring NPAs is to:
    A) Increase credit
    B) Reduce slippage
    C) Freeze accounts
    D) Remove limits
    Answer: B – Taking actions to prevent loan accounts from becoming NPA by ensuring timely repayments and controlling overdue accounts.

CHAPTER 8 – Government Guarantees, Security Erosion, Others (20 MCQs)

81. Central Govt guaranteed advances become NPA when:
    A) Overdue >90 days
    B) Guarantee repudiated
    C) Stock statement expired
    D) Renewal pending
    Answer: B
82. State Govt guaranteed advances become NPA when overdue:
    A) 60 days
    B) 90 days
    C) 180 days
    D) On repudiation
    Answer: B
83. Farmer loans are classified NPA based on:
    A) EMI
    B) Crop cycle
    C) Sanction date
    D) DP
    Answer: B
84. Short duration NPA → after:
    A) 1 season
    B) 2 seasons
    C) 3 seasons
    D) 4 seasons
    Answer: B
85. Long duration NPA → after:
    A) 1 season
    B) 2 seasons
    C) 3 seasons
    D) 4 seasons
    Answer: A
86. Agricultural loan maximum due date (short duration):
    A) 6 months
    B) 12 months
    C) 18 months
    D) 24 months
    Answer: B
87. Agricultural loan maximum due date (long duration):
    A) 12 months
    B) 18 months
    C) 24 months
    D) 36 months
    Answer: B
88. Advances backed by term deposit become NPA only when:
    A) Deposit matured
    B) Deposit unenforceable
    C) Margin insufficient
    D) Period expired
    Answer: C
89. Restructured standard asset provision under natural calamity:
    A) 1%
    B) 2%
    C) 5%
    D) 10%
    Answer: C
90. A loan becomes loss asset when:
    A) Auditor identifies loss
    B) Borrower refuses payment
    C) 50% erosion
    D) 90 days overdue
    Answer: A
91. Security erosion <50% but >10% → classify as:
    A) Standard
    B) Substandard
    C) Doubtful
    D) Loss
    Answer: C
92. Security erosion <10% → classify as:
    A) Standard
    B) Doubtful
    C) Loss
    D) Substandard
    Answer: C
93. Bills unpaid for 90 days become:
    A) Standard
    B) SMA
    C) NPA
    D) Restructured
    Answer: C
94. Income recognition is on:
    A) Accrual basis
    B) Realization basis for NPAs
    C) Sanction basis
    D) Instalment basis
    Answer: B
95. Appropriate order of appropriation:
    A) Principal → Interest → Charges
    B) Interest → Charges → Principal
    C) Charges → Interest → Principal
    D) Principal → Charges → Interest
    Answer: C
96. NPA classification should NOT consider:
    A) Security
    B) Guarantee
    C) Repayment record
    D) Stock/value
    Answer: A
97. NPA norms apply to:
    A) All banks
    B) Co-operative banks
    C) RRBs
    D) All above
    Answer: D
98. A performing asset becomes NPA due to:
    A) Lack of documentation
    B) Overdue >90 days
    C) Limit renewal pending
    D) Stock audit
    Answer: B
99. For overdraft, NPA determined by:
    A) EMI
    B) Outstanding vs DP
    C) Security value
    D) Valuation
    Answer: B
100. NPA classification is:
     A) Judgmental
     B) Objective
     C) Random
     D) Based on bank policy only
     Answer: B