Banking · Recovery Policy
Regarding a bank's internal policy for 'Default and Re-scheduling in Retail Loans', which of the following statements correctly aligns with RBI guidelines to prevent 'evergreening' of bad loans?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Revised terms must be financially viable for the borrower, documented clearly, and the asset classification is upgraded to 'Standard' only after a specified satisfactory performance period.✓
- 2Re-scheduling of a retail loan is strictly prohibited once the account is classified as an NPA under all circumstances.
- 3The bank's recovery policy must allow indefinite postponement of NPA classification if the borrower agrees to pay the accrued interest.
- 4Re-scheduling automatically upgrades the loan's status to 'Standard' if the borrower agrees to a higher interest rate, irrespective of actual repayment capability.
Correct answer
Revised terms must be financially viable for the borrower, documented clearly, and the asset classification is upgraded to 'Standard' only after a specified satisfactory performance period.
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