Consider the following statements. 1. In case of standard assets, provision for NPA must be 25% for all types of standard assets. 2. In case of sub-standard assets, provision for NPA must be 10% for all types of standard assets. 3. In case of doubtful assets, 100% provision is required for unsecured and secured advances. 4. In case of loss assets, 10% of unsecured and 100% of secured advance must be kept as provision for NPAs. Which of the statement(s) given above is/are correct?

The correct answer is: D. Both 1 and 3

The Reserve Bank of India (RBI) has prescribed the following prudential norms for provisioning for non-performing assets (NPAs) for banks in India:

• For standard assets, no provision is required.
• For sub-standard assets, 10% provision is required.
• For doubtful assets, 100% provision is required.
• For loss assets, 100% provision is required.

The RBI has also prescribed the following classification of assets:

• Standard assets: Assets that are not NPAs.
• Sub-standard assets: Assets that have been classified as NPAs for less than 12 months.
• Doubtful assets: Assets that have been classified as NPAs for more than 12 months but less than 36 months.
• Loss assets: Assets that have been classified as NPAs for more than 36 months.

Based on the above, statements 1 and 3 are correct. Statement 2 is incorrect because the provision for sub-standard assets is 10%, not 25%. Statement 4 is incorrect because the provision for loss assets is 100%, not 10% for unsecured advances and 100% for secured advances.