Economics · Banking Regulation and NPA Norms
Asset classification and provisioning norms are central to prudential supervision because timely recognition of stress improves transparency and resilience. In the context of NPA regulation, the main objective of prudential norms is to:
- 1postpone recognition of stress to protect profits in the short run
- 2convert all overdue loans into equity automatically
- 3ensure that stressed assets are identified and loss-absorption is built through provisioning✓
- 4reduce the relevance of credit appraisal in lending decisions
Correct answer
ensure that stressed assets are identified and loss-absorption is built through provisioning
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