NPA, SARFAESI, IBC

Substandard (overdue for 12 months), Doubtful (overdue for 18 months), and Loss (uncollectable). SARFAESI Act 2002 (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) gives banks the power to recover loans without going to court. Banks can seize and sell the borrower's property directly if the loan amount is Rs 2 lakh or more. This law applies only to secured loans where banks have collateral. IBC 2016 (Insolvency and Bankruptcy Code) provides a time-bound process to resolve stressed assets. It follows a strict 330-day timeline (180 days for resolution + 90 days extension + 60 days for liquidation if needed)

Provision Coverage Ratio = (Provisions held / Gross NPAs) × 100 Net NPA = Gross NPA - Provisions NPA Ratio = (Net NPAs / Net Advances) × 100

90 days makes it NPA, but SARFAESI can be invoked even before 90 days if the account shows signs of stress. The key is that the loan should be classified as NPA or likely to become NPA. Another frequent error is mixing up timelines. IBC has a 180-day resolution period (extendable by 90 days), while SARFAESI has a 60-day notice period before banks can take possession. Students often interchange these numbers in exams. The examination trend shows increasing focus on IBC provisions, especially the Corporate Insolvency Resolution Process (CIRP) and the role of Resolution Professionals.

Recent questions also test knowledge about which debts qualify under each mechanism and the hierarchy of creditors.