General Awareness Quiz on NPA’s- 28th December 2020

Q1.NPAs that have been past due for anywhere from 90 days to 12 months, with a normal risk level is known as-
(a)Sub-Standard Assets
(b)Doubtful Debts
(c)Loss Assets
(d)Standard Assets
(e)None of the above

Q2.NPAs that have been past due for more than 12 months, falls under which category?
(a)Sub-Standard Assets
(b)Doubtful Debts
(c)Loss Assets
(d)Standard Assets
(e)None of the above

Q3.If the asset is in the substandard category for a period of 12 months then it is known as-
(a)Sub-Standard Assets
(b)Doubtful Debts
(c)Loss Assets
(d)Standard Assets
(e)None of the above

Q4.________ Assets are of little value, it can no longer continue as a bankable asset, there could be some recovery value.
(a)Sub-Standard Assets
(b)Doubtful Debts
(c)Loss Assets
(d)Standard Assets
(e)None of the above

Q5.What are is/the impacts of Non-Performing Assets?
(a)Banks won’t have sufficient funds for other development projects which will impact the economy
(b)To maintain a profit margin, banks will be forced to increase interest rates.
(c)Due to the curb in further investments, it may lead to the rise of unemployment.
(d)Both (a) & (b)
(e)All of the above

Q6.In SMA, Expand the term ‘S’-
(a)Standard
(b)Sustainability
(c)Special
(d)Sustain
(e)Savings

Q7.There are _____ types of SMA-
(a)2
(b)3
(c)4
(d)5
(e)6

Q8.Which is not a type of SMA?
(a)SMA-NF
(b)SMA 0
(c)SMA 1
(d)SMA 2
(e)SMA 3

Q9.Expand ARC-
(a)Asset Restructure Company
(b)Account Restructure Company
(c)Account Reconstruction Company
(d)Asset Reconstruction Company
(e)Asset Reconstruction Corporation

Q10.A loan granted for short duration crops will be treated as NPA, if the instalment of principal or interest thereon remains overdue for how many crop seasons?
(a)2
(b)3
(c)4
(d)5
(e)6

Solutions

S1.Ans.(d)
Sol.NPAs that have been past due for anywhere from 90 days to 12 months, with a normal risk level is known as Standard Assets.

S2.Ans.(a)
Sol.NPAs that have been past due for more than 12 months, falls under Sub-Standard Assets.They have a significantly higher risk level, combined with a borrower that has less than ideal credit. Banks usually assign a haircut (reduction in market value) to such NPAs because they are less certain that the borrower will eventually repay the full amount.

S3.Ans.(b)
Sol.If the asset is in the substandard category for a period of 12 months then it is known as Doubtful Debts.

S4.Ans.(c)
Sol.Loss Assets are of little value, it can no longer continue as a bankable asset, there could be some recovery value.

S5.Ans.(e)
Sol.The impacts of Non-Performing Assets are-
(a)Banks won’t have sufficient funds for other development projects which will impact the economy
(b)To maintain a profit margin, banks will be forced to increase interest rates.
(c)Due to the curb in further investments, it may lead to the rise of unemployment.

S6.Ans.(c)
Sol.Special Mention Accounts are those assets/accounts that shows symptoms of bad asset quality in the first 90 days itself or before it being identified as NPA.

S7.Ans.(c)
Sol.There are four types of Special Mention Accounts – SMA-NF, SMA 0, SMA1 and SMA 2.

S8.Ans.(e)
Sol.SMA 3 is not a type of SMA.

S9.Ans.(d)
Sol.An Asset Reconstruction Company is a specialized financial institution that buys the NPAs or bad assets from banks and financial institutions so that the latter can clean up their balance sheets.

S10.Ans.(a)
Sol.A loan granted for short duration crops will be treated as NPA, if the instalment of principal or interest thereon remains overdue for two crop seasons.

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