The correct answer is: C. Where the loss has been identified by the bank
A sub-standard asset is an asset that is impaired and has a significant possibility of becoming a non-performing asset. This means that the bank has identified that there is a loss on the asset and that the borrower is unlikely to be able to repay the loan in full.
A non-performing asset (NPA) is an asset that is not performing as expected. This can include loans that are overdue, assets that are in default, or assets that have been written off.
An asset is impaired when its carrying value is greater than its fair value. This can happen when the asset has suffered a loss in value, such as when the borrower defaults on a loan.
A significant possibility of becoming a non-performing asset means that there is a greater than 50% chance that the asset will become a non-performing asset within the next 12 months.
The other options are incorrect because:
- Option A is incorrect because it refers to a remaining NPA, which is not the same as a sub-standard asset. A remaining NPA is an NPA that has been outstanding for more than 12 months.
- Option B is incorrect because it refers to a remaining NPA, which is not the same as a sub-standard asset. A remaining NPA is an NPA that has been outstanding for more than 12 months.
- Option D is incorrect because it refers to a loan that is overdue for a period of 1 year, which is not the same as a sub-standard asset. A loan that is overdue for a period of 1 year is a non-performing asset, but not necessarily a sub-standard asset.