Banking Products, Accounts & NPA Framework

Deposit accounts: (1) Savings — for individuals, interest-bearing, withdrawal limits; (2) Current — for businesses, no interest, overdraft allowed, unlimited transactions; (3) Fixed/Term Deposit — lump sum locked for a tenure, highest interest; (4) Recurring — fixed monthly instalments. Special accounts: NRE (repatriable, in INR), NRO (non-repatriable income in India), FCNR (foreign currency term deposit). CASA = Current Account + Savings Account; a high CASA ratio means cheaper funds for the bank. Negotiable Instruments Act, 1881 covers Promissory Notes, Bills of Exchange and Cheques. A cheque is valid for 3 months from the date of issue. Memory aid: 'Current = Company, Savings = Self'.

An asset becomes a Non-Performing Asset (NPA) when interest/principal is overdue for more than 90 days. Classification: Standard (performing) > Sub-standard (NPA up to 12 months) > Doubtful (NPA beyond 12 months) > Loss asset (uncollectible). Provisioning rises as quality falls. Recovery tools: SARFAESI Act, 2002 lets banks seize and sell secured assets WITHOUT court intervention (threshold: secured creditor holding 75% by value can act; minimum loan Rs 1 lakh and outstanding > 20% of principal+interest). DRTs (Debt Recovery Tribunals) under the RDDBFI Act, 1993 handle claims above Rs 20 lakh. The IBC, 2016 provides time-bound (330-day) resolution. Lok Adalats handle smaller dues. Memory: '90 days = NPA; SARFAESI = Seize without court'.

Q: A loan account's interest has been overdue since 1 January. As on 1 December the same year, classify it. Method: Count overdue days. Jan-Dec is ~11 months (>90 days), so it crossed into NPA after ~31 March. From NPA date, if it remains NPA up to 12 months it is 'Sub-standard'. Since only ~8 months have passed since it became an NPA (April to Dec), it is still SUB-STANDARD (not yet doubtful, which needs 12 months as NPA). Trick ladder: 0-90 days overdue = Standard; NPA 0-12 months = Sub-standard; NPA >12 months = Doubtful; unrecoverable = Loss.

As a future bank officer you'll live in deposits, loans and asset classification — so IBPS tests it heavily (2–4 marks) and interviews probe it too. This topic covers account types, CASA and the NPA framework, all durable and definitional.

Deposit & account types

Account	Key feature
Savings	Interest-bearing, withdrawal limits; retail
Current	For businesses; no interest; overdraft allowed
Recurring Deposit (RD)	Fixed monthly instalment for a term
Fixed Deposit (FD)	Lump sum, fixed tenure & rate; premature-withdrawal penalty
CASA	Current + Savings; low-cost funds — higher CASA = cheaper deposits for a bank

Loan products

Term loans, cash credit / overdraft (working capital), demand loans, retail (home, auto, education, personal), and gold/priority-sector loans.

NPA framework (the exam favourite)

A loan becomes a Non-Performing Asset (NPA) when interest/principal is overdue > 90 days (term loans).

Class	Condition
Standard	Performing, not an NPA
Sub-standard	NPA for ≤ 12 months
Doubtful	NPA for > 12 months
Loss	Loss identified; little/no recoverable value

Special Mention Accounts (early warning): SMA-0 (1–30 days overdue), SMA-1 (31–60), SMA-2 (61–90) — then it tips into NPA.

Exam Tricks & Tips

• 🎯 NPA ladder mnemonic "Standard→Sub→Doubt→Loss" with the clock: 90 days to become NPA, 12 months to turn doubtful.
• 🎯 CASA = cheap money: current pays 0% and savings pays little, so a high CASA ratio boosts a bank's net interest margin.
• 🎯 SMA numbering is easy: SMA-1 = up to 60 days, SMA-2 = up to 90 days (the number roughly tracks the bucket order).
• 🎯 "Gross NPA vs Net NPA": Net NPA = Gross NPA − provisions; Net is always ≤ Gross.
• 🎯 Provisioning rises as an asset worsens (standard lowest, loss = 100%).
• ❌ Common mistake: using 90 days for all facilities — for agricultural crop loans the norm is 2 crop seasons (short) / 1 season (long), not 90 days.

Expected exam pattern

Direct definition questions (days to NPA, sub-standard vs doubtful), CASA meaning, SMA buckets, and Gross-vs-Net NPA. Numeric NPA-ratio calculation occasionally appears.

Quick recap

Accounts: savings/current (=CASA), RD, FD. Loans: term/cash-credit/retail. NPA at 90 days overdue → sub-standard (≤12m) → doubtful (>12m) → loss. Early warning = SMA-0/1/2. Net NPA = Gross − provisions.

Cover the answer, recall, then check. 12 cards on products, accounts and NPAs.

Q1. After how many days overdue does a term loan become an NPA?
A1. 90 days.

Q2. What does CASA stand for and why does it matter?
A2. Current Account + Savings Account deposits — they are low-cost funds, so a high CASA ratio lowers a bank's cost of funds.

Q3. How long must an asset be an NPA before it is classified "doubtful"?
A3. More than 12 months (sub-standard is up to 12 months).

Q4. Define a "loss asset."
A4. An asset where a loss has been identified but not fully written off; little to no recovery is expected.

Q5. What are SMA-0, SMA-1 and SMA-2?
A5. Special Mention Accounts by days overdue: SMA-0 (1–30), SMA-1 (31–60), SMA-2 (61–90) — early-warning stages before NPA.

Q6. How is Net NPA calculated?
A6. Net NPA = Gross NPA − provisions held against it.

Q7. Which account type typically allows an overdraft and pays no interest?
A7. Current account (used by businesses).

Q8. Difference between a Recurring Deposit and a Fixed Deposit?
A8. RD = fixed monthly instalments over a term; FD = a single lump sum locked for a fixed tenure.

Q9. What is "cash credit"?
A9. A working-capital loan against inventory/receivables where the borrower draws up to a sanctioned limit.

Q10. Which asset class carries 100% provisioning?
A10. Loss assets.

Q11. For a short-duration crop loan, when does the account turn NPA?
A11. When instalment/interest is overdue for two crop seasons (not 90 days).

Q12. What is the "standard" asset category?
A12. A performing loan that is not an NPA and carries the lowest provisioning.