General Studies · Income Recognition and Asset Classification
For an advance against Term Deposits (TD) fully covered by the deposit amount, when should the bank stop recognizing interest income on the loan on an accrual basis?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1If the interest remains overdue for 90 days, unless the bank has a lien on the deposit and has the right to adjust the overdue interest.✓
- 2Only when the bank sets off the loan against the TD, making the entire loan outstanding.
- 3Only if the interest remains overdue for 90 days or more.
- 4Immediately, if the borrower's other accounts with the bank become NPA.
Correct answer
If the interest remains overdue for 90 days, unless the bank has a lien on the deposit and has the right to adjust the overdue interest.
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