University · Bank Audit Calculators

NPA / IRAC Classification Calculator.

Classify a bank advance under RBI's IRAC norms — SMA-0/1/2 staging, the 90-day NPA test, the out-of-order test for CC/OD, the crop-season test for agri advances, then sub-standard / doubtful / loss staging with the provisioning computation. Built for bank branch statutory auditors and stock auditors.

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Classify the account.

Facility type

Days overdue

Overdue = not paid on the due date fixed by the bank. NPA when overdue for more than 90 days.

Outstanding balance (₹ lakh)

Realisable value of security (₹ lakh)

Secured portion = lower of security value and outstanding; the rest is the unsecured portion.

Months since the account became NPA

≤ 12 months as NPA → sub-standard. Beyond 12 months → doubtful (D1 up to 1 year in doubtful, D2 1–3 years, D3 > 3 years).

Identified as a loss asset?

Loss identified by the bank, internal / external auditors or RBI inspection, but not written off wholly.

Classification

Sub-standard (NPA ≤ 12 months)

Interest and/or instalment of principal remains overdue for more than 90 days.

Provisioning computation

Sub-standard — total outstanding (no allowance for security / ECGC cover)

₹100 L × 15%₹15 L

Total provision required₹15 L

Sub-standard provision is on the total outstanding without allowance for security or ECGC cover. Unsecured exposures (realisable security ≤ 10% ab-initio) attract 25%; unsecured infrastructure loans with escrow-type safeguards attract 20%.

Borrower-wise, not facility-wise

If any one credit facility of a borrower becomes NPA, all facilities granted to that borrower must be treated as NPA — asset classification is borrower-wise, not facility-wise. In a branch audit, always pull the full borrower exposure before signing off a single account.

Upgrade rule

The account may be upgraded to standard only when the entire arrears of interest and principal pertaining to all credit facilities of the borrower are paid (RBI circular of November 12, 2021). Partial recovery does not permit an upgrade — a common finding in branch audits.

Bank branch audit

The IRAC test is repetitive; missing one account is expensive — every borrower, every facility.

CORAA's audit workspace tracks NPA classification checks, MOC candidates and LFAR observations across the borrower book — so divergence never surfaces first in an RBI inspection.

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How NPA classification works under the IRAC norms

RBI's Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances (IRACP) — reissued every April, current edition dated April 1, 2025 — sets one objective test per facility type. A term loan becomes an NPA when interest and/or an instalment of principal remains overdue for more than 90 days. A bill purchased or discounted becomes NPA when it remains overdue for more than 90 days. A CC/OD account becomes NPA when it is "out of order" — the outstanding balance remains continuously in excess of the sanctioned limit / drawing power for 90 days, or, even where the outstanding is within the limit, there are no credits continuously for 90 days or the credits are not enough to cover the interest debited during the previous 90-day period (definition as clarified by RBI's circular of November 12, 2021). Agricultural advances follow the crop cycle instead: overdue for two crop seasons for short-duration crops, one crop season for long-duration crops.

Before NPA, accounts pass through Special Mention Account (SMA) stages, stamped as part of the day-end process for each calendar date: SMA-0 (overdue 1–30 days), SMA-1 (31–60), SMA-2 (61–90). For revolving facilities such as CC/OD, only SMA-1 and SMA-2 apply, based on the outstanding remaining continuously in excess of limit / drawing power. Once NPA, the account is sub-standard while it has remained NPA for up to 12 months; thereafter it is doubtful — D1 for up to one year in the doubtful category, D2 for one to three years, D3 beyond three years. A loss asset is one identified as a loss by the bank, its auditors or RBI inspection but not yet written off.

Provisioning follows the category. Standard assets: 0.40% general, with sector variants (direct agriculture and SME 0.25%, individual housing 0.25%, commercial real estate 1.00%, CRE — residential housing 0.75%, teaser-rate housing 2.00%). Sub-standard: 15% of the total outstanding without allowance for security, rising to 25% for unsecured exposures (realisable security not more than 10% ab-initio), with 20% for unsecured infrastructure loans having escrow-type safeguards. Doubtful: 100% of the unsecured portion plus 25% / 40% / 100% of the secured portion for D1 / D2 / D3. Loss: 100%. And two principles bind everything: classification is borrower-wise, not facility-wise; and an NPA is upgraded to standard only when the entire arrears of interest and principal across all facilities are paid.

Worked example — CC account slipping to doubtful

A cash-credit account has a sanctioned limit of ₹100 lakh. Outstanding is ₹100 lakh and the realisable value of stock and book-debt security is ₹60 lakh. The account first went out of order 20 months ago and was classified NPA at the 90-day mark; it has now been NPA for 18 months.

Inputs

FacilityCC / OD (out of order)

Outstanding₹100 L

Realisable security₹60 L

Time as NPA18 months

Output

ClassificationDoubtful D1 (6 months in doubtful)

Secured portion ₹60 L × 25%₹15 L

Unsecured portion ₹40 L × 100%₹40 L

Total provision₹55 L

The account was sub-standard for its first 12 months as NPA, then moved to doubtful. At 18 months as NPA it has been doubtful for 6 months — D1. The unsecured portion (outstanding minus realisable security = ₹40 L) is provided at 100%; the secured ₹60 L at the D1 rate of 25%. Every other facility of this borrower at the branch must also be classified NPA — borrower-wise classification.

Common mistakes

Confusing the 90-day overdue test with the out-of-order test

Term loans use days-overdue. CC/OD accounts use the "out of order" definition — which can trigger even when the outstanding is within the limit, if there are no credits for 90 days or credits are insufficient to cover the interest debited during the previous 90-day period. An account fully within its limit can still be NPA.

Testing out-of-order at month-end instead of continuously

Since the November 12, 2021 clarification, out-of-order status is evaluated on a continuous, day-end basis — not by looking at the position on reporting dates. Branch systems stamp SMA/NPA as part of the day-end process; the auditor should test the flagging logic, not just quarter-end listings.

Applying the 90-day rule to agricultural advances

Crop-linked agricultural advances are NPA on the crop-season test — two crop seasons overdue for short-duration crops, one for long-duration crops (season as determined by the State Level Bankers' Committee). Applying 90 days to a kharif crop loan overstates NPAs; ignoring the season test understates them.

Upgrading on partial recovery

An NPA may be upgraded to standard only when the entire arrears of interest and principal across all facilities of the borrower are paid. Recovering just the critical amount or one facility's overdue does not permit an upgrade — a frequent memorandum-of-changes item in branch audits.

Netting security against a sub-standard outstanding

The 15% sub-standard provision applies to the total outstanding without any allowance for security or ECGC cover. Security value only splits the base once the account is doubtful (secured portion at 25/40/100%, unsecured portion at 100%).

Frequently asked questions

When does a loan account become an NPA?+

A term loan becomes NPA when interest and/or an instalment of principal remains overdue for more than 90 days. A CC/OD account becomes NPA when it is "out of order" for 90 days. Bills are NPA when overdue for more than 90 days. Agricultural advances become NPA when overdue for two crop seasons (short-duration crops) or one crop season (long-duration crops).

When does a CC account become NPA?+

When it is "out of order": (i) the outstanding balance remains continuously in excess of the sanctioned limit / drawing power for 90 days, or (ii) even if within the limit, there are no credits continuously for 90 days, or the credits are not enough to cover the interest debited during the previous 90-day period. The status is evaluated continuously as part of the day-end process, per RBI's clarification of November 12, 2021.

What are SMA-0, SMA-1 and SMA-2?+

Special Mention Account stages before NPA, stamped in the day-end process: SMA-0 — principal/interest overdue 1–30 days; SMA-1 — 31–60 days; SMA-2 — 61–90 days. For revolving facilities (CC/OD), only SMA-1 and SMA-2 apply, based on the outstanding remaining continuously in excess of the sanctioned limit or drawing power for 31–60 and 61–90 days respectively.

What are the NPA provisioning rates?+

Sub-standard: 15% of total outstanding (25% for unsecured exposures; 20% for unsecured infrastructure loans with escrow safeguards). Doubtful: 100% of the unsecured portion, plus 25% (D1, up to 1 year doubtful), 40% (D2, 1–3 years) or 100% (D3, over 3 years) of the secured portion. Loss assets: 100%. Standard assets: 0.40% general, 0.25% direct agri/SME and individual housing, 1.00% CRE, 0.75% CRE-RH, 2.00% teaser-rate housing.

When does a sub-standard asset become doubtful?+

When it has remained in the sub-standard category for 12 months. Doubtful assets are then sub-staged by time in the doubtful category: D1 up to one year, D2 one to three years, D3 more than three years — the secured-portion provision steps up from 25% to 40% to 100%.

Is NPA classification facility-wise or borrower-wise?+

Borrower-wise. If any one credit facility of a borrower becomes NPA, all facilities granted to that borrower must be treated as NPA — not just the facility that turned irregular. (Government-guaranteed advances have a narrow carve-out for classification until the guarantee is invoked and repudiated.)

When can an NPA be upgraded to standard?+

Only when the entire arrears of interest and principal pertaining to all credit facilities of the borrower are paid — per RBI's circular of November 12, 2021. Partial payments, payment of only the overdue on one facility, or reduction below the 90-day mark do not permit an upgrade. Restructured accounts follow their own upgrade conditions under the restructuring framework.

Does interest income stop on an NPA?+

Yes — income recognition on NPAs is on realisation, not accrual. Interest accrued and credited to income in the past that remains unrealised must be reversed when the account becomes NPA. Fees and similar income on NPAs are recognised only on realisation.

Authoritative sources

RBI

Master Circular — Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances (April 1, 2025) — RBI/2025-26/13, DOR.STR.REC.9/21.04.048/2025-26 — consolidates all IRACP instructions up to March 31, 2025. Reissued each April; always use the latest edition.

RBI

Prudential norms on IRACP — Clarifications (November 12, 2021) — RBI/2021-2022/125, DOR.STR.REC.68/21.04.048/2021-22 — day-end SMA/NPA stamping, refined out-of-order definition, upgrade only on payment of entire arrears of interest and principal.

Always confirm against the latest version of the source. Regulations evolve and amendments are common.

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Last reviewed: 2026-07-29 · For informational purposes only — not professional advice.