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NPA and Asset Quality — Banking Questions & Practice

Practise 9 NPA and Asset Quality questions from Banking for competitive exams such as UPSC, Banking, SSC and Railway. Read the worked questions below, check every answer with an explanation, and track what you get wrong.

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Practice questions on NPA and Asset Quality — with answers

Try each question first, then open the answer. Explanations are included.

1. In banking asset classification, what does 'Standard Asset' refer to?

AAn asset that has remained in the sub-standard category for a period of 12 months
BGross NPA minus provisions made by the bank for bad debts
CAn asset that has remained a Non-Performing Asset (NPA) for a period of less than or equal to 12 months
DAn asset that does not disclose any problem and does not carry more than normal risk

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Answer: D

'Standard Asset': An asset that does not disclose any problem and does not carry more than normal risk.

2. In banking asset classification, what does 'Sub-Standard Asset' refer to?

AAn asset that has remained a Non-Performing Asset (NPA) for a period of less than or equal to 12 months
BAn asset that has remained in the sub-standard category for a period of 12 months
CAn asset that does not disclose any problem and does not carry more than normal risk
DThe total value of gross non-performing assets for a bank in a particular quarter/financial year, before provisioning

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Answer: A

'Sub-Standard Asset': An asset that has remained a Non-Performing Asset (NPA) for a period of less than or equal to 12 months.

3. In banking asset classification, what does 'Doubtful Asset' refer to?

AAn asset that has remained in the sub-standard category for a period of 12 months
BGross NPA minus provisions made by the bank for bad debts
CAn asset that has remained a Non-Performing Asset (NPA) for a period of less than or equal to 12 months
DAn asset that does not disclose any problem and does not carry more than normal risk

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Answer: A

'Doubtful Asset': An asset that has remained in the sub-standard category for a period of 12 months.

4. In banking asset classification, what does 'Net NPA' refer to?

AGross NPA minus provisions made by the bank for bad debts
BThe total value of gross non-performing assets for a bank in a particular quarter/financial year, before provisioning
CAn asset that does not disclose any problem and does not carry more than normal risk
DAn asset that has remained a Non-Performing Asset (NPA) for a period of less than or equal to 12 months

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Answer: A

'Net NPA': Gross NPA minus provisions made by the bank for bad debts.

5. As per RBI norms, after how many days of non-payment does a loan account typically get classified as an NPA?

A180 days
B90 days
C60 days
D30 days

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Answer: B

The correct answer is '90 days'.

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NPA and Asset Quality — Banking Questions & Practice

Practice questions on NPA and Asset Quality — with answers

1. In banking asset classification, what does 'Standard Asset' refer to?

2. In banking asset classification, what does 'Sub-Standard Asset' refer to?

3. In banking asset classification, what does 'Doubtful Asset' refer to?

4. In banking asset classification, what does 'Net NPA' refer to?

5. As per RBI norms, after how many days of non-payment does a loan account typically get classified as an NPA?

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