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Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.
Q. Which of the following is not included in the definition of 'security'?
- a)Tangible security properly charged to the bank
- b)Intangible securities like guarantees and comfort letters
- c)Realizable value of the security
- d)All of the above are included in the definition of 'security'
Correct answer is option 'B'. Can you explain this answer?
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Direction: The Reserve Bank of India has laid down guidelines for bank...
Understanding Security in Loan Classification
In the context of banking and loan classification, security refers to the collateral provided by borrowers to mitigate the risk faced by banks in case of default. The classification of what constitutes security is critical for banks to assess the risk associated with lending.
Types of Security
- Tangible Security: This includes physical assets like property, machinery, or inventory that are properly charged to the bank. These assets can be easily valued and liquidated in case of default.
- Intangible Securities: This category includes guarantees and comfort letters. These are not physical assets but rather promises or commitments from third parties to cover the loan in case of default.
- Realizable Value of the Security: This refers to the assessment of how much can be recovered from the security in the event of a loan default. It is crucial for determining the bank's risk exposure.
Why Option B is Correct
The correct answer to the question is option 'B' because:
- Intangible securities like guarantees and comfort letters are not considered as direct security in the traditional sense. They do not provide a tangible asset that the bank can seize or liquidate.
- While they do offer some level of assurance to the bank, they lack the concrete value that tangible securities provide, making them less reliable in terms of asset classification.
In summary, while all options relate to security in some manner, only tangible securities and realizable values are included in the strict definition of security for the purposes of loan classification.
In the context of banking and loan classification, security refers to the collateral provided by borrowers to mitigate the risk faced by banks in case of default. The classification of what constitutes security is critical for banks to assess the risk associated with lending.
Types of Security
- Tangible Security: This includes physical assets like property, machinery, or inventory that are properly charged to the bank. These assets can be easily valued and liquidated in case of default.
- Intangible Securities: This category includes guarantees and comfort letters. These are not physical assets but rather promises or commitments from third parties to cover the loan in case of default.
- Realizable Value of the Security: This refers to the assessment of how much can be recovered from the security in the event of a loan default. It is crucial for determining the bank's risk exposure.
Why Option B is Correct
The correct answer to the question is option 'B' because:
- Intangible securities like guarantees and comfort letters are not considered as direct security in the traditional sense. They do not provide a tangible asset that the bank can seize or liquidate.
- While they do offer some level of assurance to the bank, they lack the concrete value that tangible securities provide, making them less reliable in terms of asset classification.
In summary, while all options relate to security in some manner, only tangible securities and realizable values are included in the strict definition of security for the purposes of loan classification.
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Direction: The Reserve Bank of India has laid down guidelines for bank...
'Security' is defined as tangible security properly charged to the bank and does not include intangible securities like guarantees, comfort letters, etc.
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Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer?
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Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer? for Bank Exams 2024 is part of Bank Exams preparation. The Question and answers have been prepared according to the Bank Exams exam syllabus. Information about Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Bank Exams 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer?.
Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer? for Bank Exams 2024 is part of Bank Exams preparation. The Question and answers have been prepared according to the Bank Exams exam syllabus. Information about Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Bank Exams 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer?.
Solutions for Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for Bank Exams.
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Here you can find the meaning of Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer?, a detailed solution for Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer? has been provided alongside types of Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Direction: The Reserve Bank of India has laid down guidelines for banks to classify their loans and advances into different categories based on their repayment status. One of the key categories is Non-performing Assets (NPAs) or Stressed Assets. As per the IRAC (Income Recognition and Asset Classification) norms, a loan is classified as an NPA if the interest and/or installment of the principal remains overdue for a period of 90 days. Once a loan is classified as an NPA, banks are required to make provisions against it as per the prescribed norms. The provisioning requirements increase with the age of the NPA, and banks are required to make higher provisions for NPAs that are older than one year.Q. Which of the following is not included in the definition of security?a)Tangible security properly charged to the bankb)Intangible securities like guarantees and comfort lettersc)Realizable value of the securityd)All of the above are included in the definition of securityCorrect answer is option 'B'. Can you explain this answer? tests, examples and also practice Bank Exams tests.
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