Credit Control and Monitoring
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Advanced Bank Management — CAIIB.
One-liners from this chapter
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What is the SMA-0 classification for non-agricultural cash credit/overdraft accounts as per RBI norms?
SMA-0 applies when the outstanding balance remains continuously in excess of the sanctioned limit or drawing power for 1 to 30 days.
What is the maximum age of book debts typically considered eligible for Drawing Power computation in a cash credit account?
Book debts up to 90 days (some banks use 120 days) are eligible for Drawing Power computation.
What is the SMA-1 classification for non-agricultural cash credit/overdraft accounts as per RBI norms?
SMA-1 applies when the outstanding balance remains continuously in excess of the sanctioned limit or drawing power for 31 to 60 days.
What is the typical margin applied on eligible book debts for Drawing Power computation?
Typically 25–40% margin is applied on eligible book debts; net DP = book debts × (100% – margin%).
What is the SMA-2 classification for non-agricultural cash credit/overdraft accounts as per RBI norms?
SMA-2 applies when the outstanding balance remains continuously in excess of the sanctioned limit or drawing power for 61 to 90 days.
How are creditors for purchases treated when computing Drawing Power on stock in a cash credit account?
Creditors for purchases are deducted from paid-up stock value before applying the margin for DP computation.
After how many days does a non-agricultural cash credit/overdraft account become an NPA under RBI norms?
A non-agricultural cash credit/overdraft account becomes a Non-Performing Asset (NPA) when the outstanding balance remains in excess of the sanctioned limit or drawing power for more than 90 days.
In a DP computation example: stock Rs 80 lakh (margin 25%), creditors Rs 20 lakh — what is the DP on stock?
DP on stock = (80 – 20) × 75% = Rs 45 lakh.
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