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ABM + BFM + BRBL — BFM Module B & ABM Module D — Asset Classification, Provisioning, ECGC/CGTMSE & ECL Weightage: 10 to 15 Marks (Cross-Paper High-Yield Numerical) 17 mins study
NPA IRAC Provisioning, PCR, Ind AS 109 ECL & Haircuts
ABM + BFM + BRBL (BFM Module B & ABM Module D — Asset Classification, Provisioning, ECGC/CGTMSE & ECL) — 3 Solved Case Sets & Interactive Calculator
Master every NPA & Recovery numerical tested across CAIIB ABM, BFM, and Credit Management: Exact date transitions (Substandard 12m -> Doubtful D1 1 yr -> D2 1-3 yrs -> D3 >3 yrs), Unsecured Substandard (25% vs 20% Infrastructure), ECGC/CGTMSE cover deduction before unsecured provisioning, Provisioning Coverage Ratio (PCR), and Ind AS 109 Expected Credit Loss (ECL = PD × LGD × EAD).
Switch CAIIB Workbook: Working Capital Project Finance Basel III Forex Arithmetic ALM & Treasury NPA IRAC Provisioning, PCR, Ind AS 109 ECL & Haircuts
All 6 Workbooks Step 1: Formula & Regulatory Cheat Sheet
Practice Dynamic ABM + BFM + BRBL Case Studies Core Formulas, RBI Benchmarks & Examiner Traps
| Concept / Metric | Exact Mathematical Formula | RBI Regulatory Norm / Benchmark | Common IIBF Examiner Trap |
|---|---|---|---|
| RBI IRAC NPA Provisioning Rates | Substandard Secured = 15% | Substandard Unsecured = 25% (20% for Infrastructure Escrow) | Doubtful Secured: D1 (up to 1 yr) = 25%, D2 (1 to 3 yrs) = 40%, D3 (> 3 yrs) = 100% | Doubtful Unsecured = 100% | Loss Assets = 100% | An account remains in Substandard category for 12 months before migrating to Doubtful-1 (D1). | In Doubtful accounts, the unsecured portion ALWAYS attracts 100% provisioning immediately in D1 itself, while only the secured portion is provisioned at 25% (D1), 40% (D2), or 100% (D3)! |
| Doubtful Account with ECGC / CGTMSE Guarantee Cover | Unsecured Balance = Total Outstanding - Realizable Value of Security (RVS); Net Unsecured Exposure = Unsecured Balance × (1 - ECGC/CGTMSE Cover %) | Deduct Realizable Security Value FIRST, then deduct ECGC/CGTMSE cover % from the remaining unsecured balance! | Do not apply ECGC cover % to the entire loan balance; apply it only to the unsecured portion after deducting realizable security value. |
| Ind AS 109 / IFRS 9 Three-Stage Expected Credit Loss (ECL) | Stage 1 (Performing, ≤ 30 DPD): 12-Month ECL = 12m_PD × LGD × EAD | Stage 2 (SICR, 31–89 DPD) & Stage 3 (Credit-Impaired ≥ 90 DPD): Lifetime ECL = Lifetime_PD × LGD × EAD | LGD = 1 - Recovery Rate; Stage 2 triggers when Significant Increase in Credit Risk (SICR) occurs or account crosses 30 DPD. | Interest revenue in Stage 1 & Stage 2 is recognized on Gross Carrying Amount, whereas in Stage 3 it is recognized on Net Carrying Amount (Gross - ECL Allowance)! |
CASE STUDY SET #1Moderate (IIBF Standard)10 Marks (5 × 2M)
Date-Wise NPA Timeline, Doubtful D1/D2/D3 Migration & ECGC Guarantee Cover
Official IIBF Case Scenario & Financial Data:
An export packing credit & term loan facility of M/s Global Apparels Ltd. slipped into NPA (Substandard) on 15th May 2022. As on 31st March 2025, the total outstanding balance is ₹400 Lakhs. The Realizable Value of Security (factory land & machinery) assessed by an approved valuer is ₹160 Lakhs. The account is covered by ECGC Export Credit Guarantee to the extent of 60%.
| Account Parameter | Detail / Amount |
|---|---|
| Date of Slippage into NPA (Substandard) | 15th May 2022 |
| Date of Substandard -> Doubtful (D1) Migration (after 12 months) | 15th May 2023 |
| Date of Doubtful D1 -> Doubtful D2 Migration (after 1 year in D1) | 15th May 2024 |
| Total Outstanding Balance as on 31st March 2025 | ₹400 Lakhs |
| Realizable Value of Security (RVS) | ₹160 Lakhs |
| ECGC Guarantee Cover Percentage | 60% |
Question 1.1 • 2 Marks
What is the exact IRAC asset classification of M/s Global Apparels Ltd. as on 31st March 2025, and what provisioning rate applies to its secured portion?
A Doubtful-2 (D2); 40% on Secured Portion
B Doubtful-1 (D1); 25% on Secured Portion
C Doubtful-3 (D3); 100% on Secured Portion
D Substandard; 15% on Secured Portion
Correct Answer: Option A — Doubtful-2 (D2); 40% on Secured Portion
NPA (15-May-2022) + 12m = D1 (15-May-2023); D1 + 1 yr = D2 (15-May-2024 to 14-May-2026)- Step 1: Slipped to Substandard on 15th May 2022.
- Step 2: Completed 12 months in Substandard and entered Doubtful-1 (D1) on 15th May 2023.
- Step 3: Completed 1 year in D1 on 15th May 2024 and entered Doubtful-2 (D2, 1 to 3 years in Doubtful). On 31st March 2025, it is in D2, attracting 40% provision on the secured portion.
IIBF Examiner Tip: Always trace the 12-month Substandard period first before counting Doubtful years!
Question 1.2 • 2 Marks
What is the Unsecured Balance before ECGC cover, and how much of that Unsecured Balance is covered by ECGC (at 60%)?
A Unsecured = ₹240 Lakhs; ECGC Cover = ₹144 Lakhs
B Unsecured = ₹240 Lakhs; ECGC Cover = ₹240 Lakhs
C Unsecured = ₹160 Lakhs; ECGC Cover = ₹96 Lakhs
D Unsecured = ₹400 Lakhs; ECGC Cover = ₹240 Lakhs
Correct Answer: Option A — Unsecured = ₹240 Lakhs; ECGC Cover = ₹144 Lakhs
Unsecured Balance = Total Outstanding - Realizable Security Value; ECGC Cover = Unsecured Balance × ECGC %- Step 1: Total Outstanding = ₹400 Lakhs; Less Realizable Value of Security (₹160 L) = ₹240 Lakhs Unsecured Balance.
- Step 2: ECGC Guarantee Cover @ 60% of Unsecured Balance = 60% of ₹240 Lakhs = ₹144 Lakhs.
IIBF Examiner Tip: Per RBI IRAC norms, no provision is required on the portion guaranteed by ECGC/CGTMSE.
Question 1.3 • 2 Marks
What is the Net Unsecured Portion requiring 100% provisioning after deducting ECGC cover?
A ₹96 Lakhs
B ₹144 Lakhs
C ₹240 Lakhs
D ₹64 Lakhs
Correct Answer: Option A — ₹96 Lakhs
Net Unsecured Portion = Unsecured Balance (₹240 L) - ECGC Cover (₹144 L)- Step 1: Unsecured Balance = ₹240 Lakhs.
- Step 2: Less ECGC Covered Portion (₹144 Lakhs) = ₹96 Lakhs Net Unsecured Portion.
- Step 3: Provision @ 100% on Net Unsecured Portion = ₹96 Lakhs.
IIBF Examiner Tip: 40% of ₹240 Lakhs = ₹96 Lakhs is uncovered by both tangible security and ECGC, requiring 100% provision.
Question 1.4 • 2 Marks
What is the Provision required on the Secured Portion (₹160 Lakhs in Doubtful-2) and the Total Provision required on the account as on 31st March 2025?
A Secured Provision = ₹64 Lakhs; Total Provision = ₹160 Lakhs
B Secured Provision = ₹40 Lakhs; Total Provision = ₹136 Lakhs
C Secured Provision = ₹64 Lakhs; Total Provision = ₹304 Lakhs
D Secured Provision = ₹160 Lakhs; Total Provision = ₹256 Lakhs
Correct Answer: Option A — Secured Provision = ₹64 Lakhs; Total Provision = ₹160 Lakhs
Total Provision = (Secured Portion × 40% for D2) + (Net Unsecured Portion × 100%)- Step 1: Provision on Secured Portion (₹160 L @ 40% for D2) = ₹64 Lakhs.
- Step 2: Provision on Net Unsecured Portion (₹96 L @ 100%) = ₹96 Lakhs.
- Step 3: Total Required Provision = ₹64 Lakhs + ₹96 Lakhs = ₹160 Lakhs.
IIBF Examiner Tip: Without ECGC cover, total provision would have been ₹64 L + ₹240 L = ₹304 Lakhs; ECGC cover saves ₹144 Lakhs of capital!
Question 1.5 • 2 Marks
On which exact date will this account migrate into the Doubtful-3 (D3: more than 3 years in Doubtful category) bucket, and what will the Total Required Provision become on that date (assuming balances remain unchanged)?
A 15th May 2026; Total Provision = ₹256 Lakhs
B 15th May 2025; Total Provision = ₹256 Lakhs
C 15th May 2026; Total Provision = ₹400 Lakhs
D 15th May 2027; Total Provision = ₹256 Lakhs
Correct Answer: Option A — 15th May 2026; Total Provision = ₹256 Lakhs
D1 Entry (15-May-2023) + 3 Years in Doubtful = D3 Entry (15-May-2026); D3 Secured Provision = 100%- Step 1: Account entered Doubtful (D1) on 15th May 2023. After completing 3 full years in Doubtful (1 yr in D1 + 2 yrs in D2), it enters D3 on 15th May 2026.
- Step 2: In D3, Secured Portion (₹160 L) requires 100% provision = ₹160 Lakhs.
- Step 3: Plus Net Unsecured Provision (₹96 L) = ₹256 Lakhs Total Provision (ECGC portion of ₹144 L still remains exempt).
IIBF Examiner Tip: Remember: D2 lasts for TWO years (Year 2 and Year 3 of Doubtful status)!
CASE STUDY SET #2Advanced (High-Yield Numerical)10 Marks (5 × 2M)
Bank-Wide NPA Portfolio Provisioning, Net NPA % & Provisioning Coverage Ratio (PCR)
Official IIBF Case Scenario & Financial Data:
Compute the total regulatory provision, Net NPA %, and Provisioning Coverage Ratio (PCR) for Rashtriya Bank from its loan book summary as on 31st March 2026 (Total Gross Advances = ₹20,000 Crore):
| Asset Category | Gross Balance (₹ Crore) | Security Status / Norm |
|---|---|---|
| Standard Advances (General Commercial) | ₹18,800 Crore | 0.40% Standard Asset Provision |
| Substandard Advances (Fully Secured) | ₹400 Crore | 15% Provision |
| Substandard Advances (Unsecured — Non-Infrastructure) | ₹200 Crore | 25% Provision (15% + 10% extra) |
| Doubtful-1 (D1: up to 1 year) | ₹300 Crore | 100% Secured (25% Provision) |
| Doubtful-3 (D3: > 3 years) | ₹200 Crore | 100% Secured (100% Provision) |
| Loss Assets (Unprovided so far) | ₹100 Crore | 100% Provision |
Question 2.1 • 2 Marks
What is the Gross NPA (in ₹ Crore and as a % of Gross Advances) of Rashtriya Bank?
A ₹1,200 Crore (6.00%)
B ₹1,100 Crore (5.50%)
C ₹1,000 Crore (5.00%)
D ₹1,400 Crore (7.00%)
Correct Answer: Option A — ₹1,200 Crore (6.00%)
Gross NPA = Substandard + Doubtful (D1+D2+D3) + Loss Assets; Gross NPA % = (Gross NPA / Gross Advances) × 100- Step 1: Gross NPA = ₹400 Cr (Sub Secured) + ₹200 Cr (Sub Unsecured) + ₹300 Cr (D1) + ₹200 Cr (D3) + ₹100 Cr (Loss) = ₹1,200 Crore.
- Step 2: Gross NPA % = (₹1,200 Cr / ₹20,000 Cr) × 100 = 6.00%.
IIBF Examiner Tip: Standard Advances (₹18,800 Cr) are excluded from Gross NPA.
Question 2.2 • 2 Marks
What is the total provision required on the Substandard portfolio (₹400 Cr Secured + ₹200 Cr Unsecured Non-Infrastructure)?
A ₹110 Crore
B ₹90 Crore
C ₹100 Crore
D ₹120 Crore
Correct Answer: Option A — ₹110 Crore
Substandard Provision = (Secured × 15%) + (Unsecured Non-Infra × 25%)- Step 1: Substandard Secured = ₹400 Cr × 15% = ₹60 Crore.
- Step 2: Substandard Unsecured (Non-Infra) = ₹200 Cr × 25% = ₹50 Crore.
- Step 3: Total Substandard Provision = ₹60 Cr + ₹50 Cr = ₹110 Crore.
IIBF Examiner Tip: Unsecured Substandard exposure (where initial security realizable value is ≤ 10% of outstanding) attracts an additional 10% provision (15% + 10% = 25%).
Question 2.3 • 2 Marks
What is the Total Specific NPA Provision required across all NPA categories (Substandard + D1 + D3 + Loss)?
A ₹485 Crore
B ₹560.20 Crore
C ₹410 Crore
D ₹525 Crore
Correct Answer: Option A — ₹485 Crore
Total Specific NPA Provision = Substandard + (D1 × 25%) + (D3 × 100%) + (Loss × 100%)- Step 1: Substandard Provision = ₹110 Crore.
- Step 2: Doubtful-1 (₹300 Cr Secured @ 25%) = ₹75 Crore.
- Step 3: Doubtful-3 (₹200 Cr @ 100%) = ₹200 Crore; Loss Assets (₹100 Cr @ 100%) = ₹100 Crore.
- Step 4: Total Specific NPA Provision = ₹110 + ₹75 + ₹200 + ₹100 = ₹485 Crore.
IIBF Examiner Tip: Keep Standard Asset General Provision (0.40% of ₹18,800 Cr = ₹75.20 Cr) separate from Specific NPA Provision!
Question 2.4 • 2 Marks
Calculate the Net Advances, Net NPA (in ₹ Crore), and Net NPA Ratio (%) of the bank.
A Net Advances = ₹19,515 Cr; Net NPA = ₹715 Cr; Net NPA % = 3.66%
B Net Advances = ₹20,000 Cr; Net NPA = ₹715 Cr; Net NPA % = 3.58%
C Net Advances = ₹19,439.80 Cr; Net NPA = ₹639.80 Cr; Net NPA % = 3.29%
D Net Advances = ₹19,515 Cr; Net NPA = ₹485 Cr; Net NPA % = 2.49%
Correct Answer: Option A — Net Advances = ₹19,515 Cr; Net NPA = ₹715 Cr; Net NPA % = 3.66%
Net NPA = Gross NPA - Specific NPA Provision; Net Advances = Gross Advances - Specific NPA Provision; Net NPA % = (Net NPA / Net Advances) × 100- Step 1: Net NPA = Gross NPA (₹1,200 Cr) - Specific NPA Provision (₹485 Cr) = ₹715 Crore.
- Step 2: Net Advances = Gross Advances (₹20,000 Cr) - Specific NPA Provision (₹485 Cr) = ₹19,515 Crore.
- Step 3: Net NPA % = (₹715 / ₹19,515) × 100 = 3.6638% (approx 3.66%).
IIBF Examiner Tip: The denominator of Net NPA % is Net Advances (₹19,515 Cr), NOT Gross Advances (₹20,000 Cr)!
Question 2.5 • 2 Marks
If the bank also holds ₹115 Crore of Floating Provisions / Technical Write-Offs eligible for PCR, what is the Provisioning Coverage Ratio (PCR %) before and after including the ₹115 Crore?
A 40.42% before; 50.00% after
B 48.50% before; 60.00% after
C 36.64% before; 46.22% after
D 44.17% before; 53.75% after
Correct Answer: Option A — 40.42% before; 50.00% after
PCR (%) = (Total NPA Provisions + Technical Write-Offs / Gross NPA) × 100- Step 1: Specific PCR (without technical write-offs) = (₹485 Cr / ₹1,200 Cr) × 100 = 40.42%.
- Step 2: Total PCR including ₹115 Cr = [(₹485 + ₹115) / ₹1,200] × 100 = (₹600 / ₹1,200) × 100 = 50.00%.
IIBF Examiner Tip: Standard Asset provisions (₹75.20 Cr) cannot be included in the numerator of PCR unless specifically permitted under old countercyclical buffer transitions.
CASE STUDY SET #3Examiner Trap Scenario10 Marks (5 × 2M)
Ind AS 109 / IFRS 9 Expected Credit Loss (ECL Stage 1, 2 & 3) & Effective Interest Rate
Official IIBF Case Scenario & Financial Data:
Under Ind AS 109 / RBI Expected Credit Loss (ECL) framework, a bank evaluates three corporate exposures as on 31st March 2026, each having an Effective Interest Rate (EIR) of 10.00% p.a.:
| Loan Account | DPD & Credit Risk Status | EAD (₹ Cr) | 12-Month PD | Lifetime PD | Recovery Rate |
|---|---|---|---|---|---|
| Loan Alpha | 10 DPD — Low Risk, No SICR | ₹500 Cr | 1.20% | 4.50% | 60% (LGD = 40%) |
| Loan Beta | 45 DPD — Rating Downgraded (SICR) | ₹400 Cr | 3.00% | 12.00% | 50% (LGD = 50%) |
| Loan Gamma | 110 DPD — Credit-Impaired (NPA) | ₹200 Cr | 100.00% | 100.00% | 45% (LGD = 55%) |
Question 3.1 • 2 Marks
Classify Loan Alpha, Loan Beta, and Loan Gamma into Ind AS 109 Stages and state which Probability of Default (PD) horizon applies to each.
A Alpha: Stage 1 (12m PD); Beta: Stage 2 (Lifetime PD); Gamma: Stage 3 (100% Default PD)
B Alpha: Stage 1 (12m PD); Beta: Stage 1 (12m PD); Gamma: Stage 3 (Lifetime PD)
C Alpha: Stage 1 (Lifetime PD); Beta: Stage 2 (Lifetime PD); Gamma: Stage 3 (100% PD)
D Alpha: Stage 1 (12m PD); Beta: Stage 2 (12m PD); Gamma: Stage 3 (100% PD)
Correct Answer: Option A — Alpha: Stage 1 (12m PD); Beta: Stage 2 (Lifetime PD); Gamma: Stage 3 (100% Default PD)
Stage 1 (≤30 DPD, no SICR) = 12m ECL; Stage 2 (>30 DPD or SICR) = Lifetime ECL; Stage 3 (≥90 DPD / Impaired) = Lifetime ECL (PD=100%)- Step 1: Loan Alpha (10 DPD, no SICR) is in Stage 1 -> requires 12-Month ECL using 12-Month PD (1.20%).
- Step 2: Loan Beta (45 DPD, rating downgraded = Significant Increase in Credit Risk) is in Stage 2 -> requires Lifetime ECL using Lifetime PD (12.00%).
- Step 3: Loan Gamma (110 DPD, credit-impaired) is in Stage 3 -> requires Lifetime ECL with PD = 100%.
IIBF Examiner Tip: Crossing 30 Days Past Due (DPD) is the rebuttable presumption trigger for migrating from Stage 1 (12m ECL) to Stage 2 (Lifetime ECL).
Question 3.2 • 2 Marks
Calculate the required ECL Loss Allowance for Loan Alpha (Stage 1) and Loan Beta (Stage 2).
A Alpha ECL = ₹2.40 Cr; Beta ECL = ₹24.00 Cr
B Alpha ECL = ₹9.00 Cr; Beta ECL = ₹6.00 Cr
C Alpha ECL = ₹3.60 Cr; Beta ECL = ₹24.00 Cr
D Alpha ECL = ₹2.40 Cr; Beta ECL = ₹6.00 Cr
Correct Answer: Option A — Alpha ECL = ₹2.40 Cr; Beta ECL = ₹24.00 Cr
ECL = Applicable PD × LGD × EAD, where LGD = 1 - Recovery Rate- Step 1: Loan Alpha (Stage 1): 12m PD = 1.20%, LGD = 1 - 0.60 = 40%, EAD = ₹500 Cr -> ECL = 0.012 × 0.40 × ₹500 Cr = ₹2.40 Crore.
- Step 2: Loan Beta (Stage 2): Lifetime PD = 12.00%, LGD = 1 - 0.50 = 50%, EAD = ₹400 Cr -> ECL = 0.12 × 0.50 × ₹400 Cr = ₹24.00 Crore.
IIBF Examiner Tip: Notice how migrating from Stage 1 to Stage 2 causes the ECL provision on Loan Beta to jump 4x (from ₹6 Cr under 12m PD to ₹24 Cr under Lifetime PD) — the famous "cliff effect"!
Question 3.3 • 2 Marks
What is the ECL Loss Allowance for Loan Gamma (Stage 3) and the Total ECL Provision across all three loans?
A Gamma ECL = ₹110.00 Cr; Total ECL = ₹136.40 Cr
B Gamma ECL = ₹90.00 Cr; Total ECL = ₹116.40 Cr
C Gamma ECL = ₹110.00 Cr; Total ECL = ₹118.40 Cr
D Gamma ECL = ₹200.00 Cr; Total ECL = ₹226.40 Cr
Correct Answer: Option A — Gamma ECL = ₹110.00 Cr; Total ECL = ₹136.40 Cr
Stage 3 ECL = 100% × LGD × EAD- Step 1: Loan Gamma (Stage 3): PD = 100%, LGD = 1 - 0.45 = 55%, EAD = ₹200 Cr -> ECL = 1.00 × 0.55 × ₹200 Cr = ₹110.00 Crore.
- Step 2: Total ECL Provision = ₹2.40 Cr (Alpha) + ₹24.00 Cr (Beta) + ₹110.00 Cr (Gamma) = ₹136.40 Crore.
IIBF Examiner Tip: Always double-check whether the table gives LGD % directly or Recovery Rate % (LGD = 100% - Recovery Rate %).
Question 3.4 • 2 Marks
Under Ind AS 109, how much Interest Revenue (at 10.00% EIR) is recognized in the Profit & Loss Account for the next year on Loan Beta (Stage 2, Gross ₹400 Cr, ECL ₹24 Cr) vs Loan Gamma (Stage 3, Gross ₹200 Cr, ECL ₹110 Cr)?
A Beta Interest = ₹40.00 Cr (on Gross); Gamma Interest = ₹9.00 Cr (on Net ₹90 Cr)
B Beta Interest = ₹37.60 Cr (on Net); Gamma Interest = ₹9.00 Cr (on Net)
C Beta Interest = ₹40.00 Cr (on Gross); Gamma Interest = ₹0 Cr (Cash basis)
D Beta Interest = ₹40.00 Cr (on Gross); Gamma Interest = ₹20.00 Cr (on Gross)
Correct Answer: Option A — Beta Interest = ₹40.00 Cr (on Gross); Gamma Interest = ₹9.00 Cr (on Net ₹90 Cr)
Stage 1 & 2 Interest = EIR × Gross Carrying Amount; Stage 3 Interest = EIR × Amortized Cost (Gross - ECL Allowance)- Step 1: For Stage 2 (Loan Beta), interest is still calculated on the Gross Carrying Amount: 10% of ₹400 Cr = ₹40.00 Crore.
- Step 2: For Stage 3 (Loan Gamma, Credit-Impaired), interest is calculated on the Net Amortized Cost (Gross ₹200 Cr - ECL ₹110 Cr = ₹90 Cr): 10% of ₹90 Cr = ₹9.00 Crore.
IIBF Examiner Tip: High-yield CAIIB ABFM/BFM distinction: Under RBI IRAC, NPA interest is recognized on cash realization basis; under Ind AS 109 Stage 3, interest is accrued on the Net Carrying Amount (Gross minus ECL).
Question 3.5 • 2 Marks
If a bank sells a ₹200 Crore Doubtful loan (carrying ₹110 Crore provision, Net Book Value = ₹90 Crore) to an Asset Reconstruction Company (ARC) for ₹105 Crore (100% cash consideration), what is the accounting impact?
A ₹15 Crore excess provision is reversed/credited to P&L
B ₹95 Crore loss is debited to P&L
C ₹105 Crore is credited directly to Capital Reserve
D No P&L impact
Correct Answer: Option A — ₹15 Crore excess provision is reversed/credited to P&L
Net Gain / Provision Reversal on Cash Sale to ARC = Cash Consideration Received - Net Book Value (Gross - Provision)- Step 1: Net Book Value (NBV) of the NPA = Gross (₹200 Cr) - Existing Provision (₹110 Cr) = ₹90 Crore.
- Step 2: Cash Sale Consideration from ARC = ₹105 Crore.
- Step 3: Since Cash Received (₹105 Cr) > Net Book Value (₹90 Cr), the excess provision of ₹15 Crore is reversed to the Profit & Loss Account.
IIBF Examiner Tip: When an NPA is sold for cash above its Net Book Value, excess provision up to the cash realized is credited back to P&L.
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Substandard Secured (@ 15%):₹30 Crore
Doubtful D1 Secured (@ 25%):₹37.5 Crore
Doubtful D2 Secured (@ 40%):₹40 Crore
Total Required IRAC Provision:₹197.5 Crore
Frequently Asked IIBF Exam Questions (ABM + BFM + BRBL)
What is the provisioning rate for Standard Advances across different sectors in India?
Standard asset provisioning rates set by RBI are: Farm Credit (direct agriculture) & SMEs = 0.25%; Commercial Real Estate (CRE) = 1.00%; Commercial Real Estate – Residential Housing (CRE-RH) = 0.75%; Teaser Housing Loans = 2.00% (reduces to 0.40% 1 year after rate reset); All other Standard Advances (Medium & Large Corporates, Retail) = 0.40%.
How does CGTMSE or ECGC guarantee affect Substandard vs Doubtful provisioning?
The guaranteed portion of an advance covered by CGTMSE or ECGC is exempt from provisioning when the account is classified as Doubtful. Only the uncovered unsecured portion attracts 100% provisioning, while the tangible secured portion attracts 25% (D1), 40% (D2), or 100% (D3).
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