Capital Adequacy
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Bank Financial Management — CAIIB.
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What is a Special Mention Account (SMA)?
Advance showing early stress symptoms but not yet 90+ days overdue; pre-NPA early-warning system.
Is provisioning required for SMA accounts?
No. SMA provisioning triggered only when account slips to actual NPA status (>90 days overdue).
SMA classification basis: borrower-wise or account-wise?
Borrower-wise. SMA-2 tag on one account flags borrower's entire exposure with the bank.
Define NPA (Non-Performing Asset).
Advance ceasing to generate income; common trigger is 90 days overdue/out-of-order status across products.
When is CC/OD classified 'out of order'?
Balance > drawing power; no credit 90 days; or stock statements 3 months delayed/missing.
Can NPA be downgraded without 12/36-month seasoning?
Yes, if Realisable Value of Security falls dramatically below outstanding; direct downgrade permitted.
Interest recognition on NPA advances: accrual or cash basis?
Cash basis only. Interest booked on realisation, not accrual; non-accrual of interest applies.
Account renewal/review overdue 6 months: NPA classification?
Yes. Treated as NPA even if account otherwise operating; 6-month overdue renewal triggers NPA.
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