Education
NPA Classification in India: Standard, Sub-Standard, Doubtful, Loss
6 min read
How banks classify loan accounts as NPA, the 90-day rule, and how classification affects provisioning, pricing, and resolution options.
The 90-day rule
An account is classified as a Non-Performing Asset when interest or principal remains overdue for more than 90 days. For agricultural advances the period is one or two crop seasons depending on the crop cycle.
The four classifications
- Standard — performing.
- Sub-Standard — NPA for up to 12 months.
- Doubtful — NPA for more than 12 months (further split D1/D2/D3 by age).
- Loss — identified as loss by the bank/auditor/RBI.
Why classification matters to you
- Provisioning requirements rise sharply as classification worsens — this changes the bank's appetite for OTS.
- A Doubtful account often gets better OTS terms than a Sub-Standard one.
- Loss accounts are frequent candidates for ARC sale.
Wilful defaulter vs distressed borrower
The wilful defaulter tag (RBI Master Circular) is distinct from NPA classification. It requires proven diversion or siphoning of funds and carries severe consequences. Distressed but genuine borrowers should actively contest wrongful classification.