Q. With reference to Non-Performing Assets (NPAs) consider the following statements:
1.NPA is a loan or advance for which the principal or interest payment has remained overdue for a period of 90 days.
2.Substandard Assets referred to the asset which has remained NPA for a period less than or equal to 24 months.
3.NPA reduces a bank’s capital adequacy. .
Which of the statements given above are correct?

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: C
Notes:

Statement 1 and 3 are correct. NPA is a loan or advance for which the principal or interest payment has remained overdue for a period of 90 days. NPA reduces a bank or financial institution’s capital adequacy.

Statement 2 is incorrect. Substandard Assets referred to the asset which has remained NPA for a period less than or equal to 12 months.

Source: ForumIAS