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NPA classification: the 90-day rule and the asset categories
An NPA, or non-performing asset, is a loan that has stopped paying. The test banks and lenders use is simple to say and easy to get wrong in a query: is the account overdue for more than 90 days? This guide covers the rule, the categories that follow, and how an account comes back out.
The 90-day rule
A term loan becomes an NPA when principal or interest is overdue for more than 90 days. 'More than 90' means 91 days or above. A loan at exactly 90 days is still not an NPA under that wording, which is why the boundary day matters in your bucket logic.
For cash credit and overdraft accounts there are no fixed instalments, so the test is 'out of order'. An account is out of order if the balance stays above the sanctioned limit or drawing power for 90 days, or if there are no credits for 90 days, or if credits do not cover the interest charged in the previous 90 days.
The asset categories
| Category | Rough meaning |
|---|---|
| Standard | Not an NPA |
| Sub-standard | An NPA for up to 12 months |
| Doubtful | Has stayed sub-standard for 12 months |
| Loss | Identified as not recoverable |
Provisioning rises as an account moves down this list. The rates are set by the regulator, so take them from the current circular and not from a blog post.
How an NPA comes back
An NPA can be upgraded to standard only when the borrower has paid the whole arrears of interest and principal. Paying only the interest, or only part of what is overdue, is not enough. This is why a bureau DPD can fall the day a payment posts while the account stays NPA in the lender's books.
Where this goes wrong in data work
- Using 90 and above instead of more than 90.
- Treating the DPD of one loan as the status of the borrower when your policy classifies at borrower level.
- Letting a part payment reset the clock.
- Forgetting that CC and OD accounts use out-of-order days, not instalment DPD.
- Counting an upgraded account as NPA, or the reverse, because the upgrade rule was not applied.
Related regulation
Before an account is an NPA it passes through the SMA categories. See the SMA-0, SMA-1 and SMA-2 guide. NBFCs and banks have separate directions, so check the text that applies to your institution.
Try it on your own tables
The free tools give you the prompt, the checks and how to present the result. You enter table names only.
See the free toolsFrequently asked questions
After how many days is a loan an NPA?
A term loan is an NPA when principal or interest is overdue for more than 90 days, that is 91 days or above. Confirm against the current RBI text for your type of lender.
What are the NPA categories?
Sub-standard, doubtful and loss. A sub-standard asset is an NPA for up to 12 months. It becomes doubtful after 12 months in that category. Loss assets are those identified as uncollectible.
Can an NPA become standard again?
Yes, but only when the borrower pays all arrears of interest and principal. A partial payment does not upgrade the account.
Keep reading
SMA-0, SMA-1 and SMA-2 explained with a worked example
SMA categories are RBI's early-warning labels for stressed loans before they turn NPA. See the day ranges, a dated example, and how revolving accounts differ.
BenchmarksGross NPA vs net NPA: the difference and how to calculate both
Gross NPA is the total of bad loans. Net NPA subtracts the provisions held against them. Formulas, a worked example and what the provision coverage ratio adds.