Standard asset
Also called: Performing asset · Topic: Banking Regulation, NPAs and Financial Stability · NCERT: Beyond NCERT
Meaning
A standard asset is a loan on which the borrower is paying on schedule. It carries no more than normal business risk. It is the healthy, "performing" category in RBI's IRAC (Income Recognition and Asset Classification) norms. Even so, banks keep a small general provision on it: 0.40% in general, 0.25% for farm and SME loans and 1% for commercial real estate. Once dues become overdue, the loan moves into early-warning classes called Special Mention Accounts (SMA-0: 1-30 days, SMA-1: 31-60, SMA-2: 61-90). It stays standard until it crosses 90 days.
Example
A family pays every EMI on its Rs 30 lakh home loan on time. The loan is a standard asset, and the bank keeps a general provision of 0.40%, or Rs 12,000.
Don't confuse with
- Restructured standard advance: a loan whose terms were changed because the borrower was in difficulty. It may be shown as standard, but it is counted within stressed assets.
Related concepts
- Special Mention Account
- Non-Performing Asset
- Sub-standard asset
- Doubtful asset
- Loss asset
- Gross and net NPA
- Loan loss provisioning
- Provisioning Coverage Ratio
- Stressed assets
- Expected Credit Loss provisioning