Upgradation of Loan Accounts Classified as NPAs
(i) If arrears of interest and principal are paid by the borrower in the case of loan accounts classified as NPAs, the account should no longer be treated as non-performing and may be classified as ‘standard’ accounts. Upgradation is allowed only if the account reaches “no overdues” status. This should not be misunderstood with “overdues brought within 90 days”. Upgradation of a restructured/ rescheduled/CDR accounts is governed by the restructuring / reschedulement/CDR norms as discussed later in the Chapter.
(ii) Auditor has to verify that any upgrading of accounts classified as ‘SubStandard’ or ‘Doubtful’ category wherein restructuring / re phasement of principal or interest has taken place should be upgraded to the ‘Standard Asset’ category only after a period of one year after the date when first payment of interest or of principal, whichever is earlier, falls due under the rescheduled terms, subject to satisfactory performance during the period. The total amount becoming due during this period of one year should be
recovered and there should be no overdues to make it eligible for upgradation. If the amount which has become due during this one year period is on a lower side vis a vis total amount outstanding, the other aspects of the account, viz financial performance, availability of security, operations in account, etc., should be reviewed in detail and only if found satisfactory, the account should be upgraded.
(iii) Recovery in an advance which was rescheduled cannot give the advance a better classification than the previous one. NPA accounts can be upgraded to Performing Accounts, provided all overdue are adjusted or atleast reduced to a period of less than 90 days.
(iv) Upgradation within the NPA category is not permitted i.e. a Doubtful account cannot be made Sub-standard even if the overdue are reduced to less than 12 months.