Categories of Non-performing assets

Banks are required to classify nonperforming assets into the following three categories based on the period for which the asset has remained nonperforming and the reliability of the dues:

1. Substandard Assets
2. Doubtful Assets
3. Loss Assets

Sl. No.	Asset classification	Period of NPA	Remarks
1	Substandard	for a period less than or equal to 12 months	Provided 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 banks in full.
2	Doubtful I	for a period less than or equal to 24 months or in the substandard category for a period of 12 months	---
3	Doubtful II	for a period less than or equal to 36 months or in the Doubtful I category for a period of 12 months	---
4	Doubtful III	for a period more than 36 months or in the Doubtful II category for a period of 12 months	---
5	Loss Assets	identified by the bank or internal or external auditors or the RBI inspection	the amount has not been written off wholly

Guidelines for classification of assets

• Classification of assets should be done taking into account the degree of well-defined
• Credit weaknesses and 
• The Extent of dependence on collateral security for realization of dues.

• Banks should establish appropriate internal systems to eliminate the tendency to delay or postpone the identification of NPAs, especially in respect of high value accounts. Appropriate use of SMA (Specially mentioned A/C)
• The availability of security or net worth of borrower/ guarantor should not be taken into account for the purpose of treating an advance as NPA