What Is an NPA? (RBI Definition in One Line)
A loan becomes a Non-Performing Asset (NPA) when interest or principal stays overdue for more than 90 days. That 90-day rule is unchanged in 2026, and RBI has said it will stay the same even after the move to Expected Credit Loss (ECL) provisioning on 1 April 2027.
Every rule below was checked on 17 October 2026 against two RBI documents: the Reserve Bank of India (Commercial Banks - Income Recognition, Asset Classification and Provisioning) Directions, 2025 (the rules in force today, updated as on 1 October 2026) and the Reserve Bank of India (Commercial Banks - Asset Classification, Provisioning and Income Recognition) Directions, 2026 (the final ECL rules issued on 27 April 2026, effective 1 April 2027).
Key takeaway for bank exams: NPA = overdue > 90 days. Substandard = NPA for up to 12 months (provision 15%, unsecured 25%). Doubtful = substandard for 12 months (secured part 25% / 40% / 100% by age; unsecured part 100%). Loss = 100% (or write off). Standard assets: 0.25% to 1%. ECL from 1 April 2027 adds Stage 1/2/3 but keeps the 90-day NPA rule.
When Does a Loan Become an NPA? (RBI Criteria)
| Type of loan | It is an NPA when... |
|---|---|
| Term loan | Interest and/or instalment of principal is overdue for more than 90 days |
| Overdraft / cash credit (OD/CC) | The account is "out of order" (see below) |
| OD/CC with old stock statements | Drawings are allowed for 90 days continuously on stock/receivable statements older than three months |
| Bills purchased and discounted | Overdue for more than 90 days |
| Agricultural loan (short-duration crops) | Overdue for two crop seasons |
| Agricultural loan (long-duration crops) | Overdue for one crop season (crop season of more than 12 and up to 18 months) |
| Credit card | Minimum amount due is not paid in full within 90 days of the payment due date |
| Securitisation liquidity facility | Outstanding for more than 90 days |
| Bonds / debentures held | Interest or instalment due and unpaid for more than 90 days |
What does "out of order" mean for a cash credit account?
An OD/CC account is out of order if any one is true: (1) the balance stays above the sanctioned limit or drawing power for 90 days continuously; (2) there are no credits for 90 days continuously; or (3) credits in the last 90 days are not enough to cover the interest debited.
SMA Classification: Early Warning Before NPA
RBI asks banks to flag stress early as Special Mention Accounts (SMA), as part of the day-end process.
| Category | Days overdue (principal or interest) |
|---|---|
| SMA-0 | Up to 30 days |
| SMA-1 | More than 30 and up to 60 days |
| SMA-2 | More than 60 and up to 90 days |
| NPA | More than 90 days |
RBI's own example: a loan due on 31 March 2021 and unpaid becomes SMA-1 on 30 April 2021, SMA-2 on 30 May 2021, and an NPA on 29 June 2021 (on the day-end process of that date).
Categories of NPA: Substandard, Doubtful and Loss
| Category | Definition |
|---|---|
| Substandard asset | Has been an NPA for 12 months or less |
| Doubtful asset | Has stayed substandard for 12 months |
| Loss asset | Loss identified by the bank, its auditors or RBI inspection, but not yet written off fully |
Provisioning Norms for NPAs (Current RBI Rules)
| Asset category | Provision required |
|---|---|
| Substandard (general) | 15% of total outstanding |
| Substandard, unsecured exposure | 25% (15% + additional 10%) |
| Substandard infrastructure loan with escrow safeguards | 20% |
| Doubtful: unsecured portion | 100% |
| Doubtful up to 1 year (D1): secured portion | 25% |
| Doubtful 1 to 3 years (D2): secured portion | 40% |
| Doubtful more than 3 years (D3): secured portion | 100% |
| Loss asset | Write off; if kept in books, 100% |
Provisioning Norms for Standard Assets
| Standard asset | Provision |
|---|---|
| Farm credit to agriculture, individual housing loans, Small and Micro Enterprises | 0.25% |
| Commercial Real Estate (CRE) | 1.00% |
| CRE - Residential Housing (CRE-RH) | 0.75% |
| Housing loans at teaser rates | 2.00% (back to 0.40% one year after the rate reset, if the account is standard) |
| Medium Enterprises and all other loans | 0.40% |
Standard asset provisions are not deducted to arrive at net NPA; they are shown separately as "Contingent Provisions against Standard Assets".
Gross NPA vs Net NPA
- Gross NPA = total of all NPA loans (substandard + doubtful + loss).
- Net NPA = Gross NPA minus the provisions held against those NPAs (and certain other deductions).
- Provision Coverage Ratio (PCR) = provisions held ÷ Gross NPA × 100.
Example: a bank has Gross NPA of ₹1,000 crore and NPA provisions of ₹750 crore. Net NPA = 1,000 - 750 = ₹250 crore; PCR = 750 ÷ 1,000 × 100 = 75%.
ECL Norms from 1 April 2027: What Changes
RBI issued the final ECL Directions on 27 April 2026, effective 1 April 2027, after refusing banks' requests for more time (the draft came on 7 October 2025). They apply to commercial banks except small finance banks, payments banks and local area banks.
| Stage | Meaning | Provision |
|---|---|---|
| Stage 1 | No significant increase in credit risk (SICR) since the loan was given | 12-month expected credit loss |
| Stage 2 | SICR, but not credit-impaired | Lifetime expected credit loss |
| Stage 3 | Credit-impaired | Lifetime expected credit loss |
Key ECL numbers that exam setters like:
| Point | Rule |
|---|---|
| NPA definition | Unchanged (90 days) |
| Stage 1 floor (most secured retail, corporate, medium enterprise loans) | 0.40% |
| Stage 1 floor (small and micro enterprises, farm credit) | 0.25% |
| Stage 1 floor (unsecured retail) | 1% |
| Stage 2 floor (most loan categories) | 5% |
| Stage 3 floor (secured part, most loans) | 25% in year 1, rising to 100% after 4 years |
| Capital relief for the ECL hit | Can be added back to CET1 in steps of 4/5, 3/5, 2/5, 1/5 over FY 2027-28 to FY 2030-31 |
Revise capital terms like CET1 in our Basel norms 1, 2, 3 difference note.
Common Mistakes in NPA Questions
- Writing 180 days or 120 days as the NPA period. It has been 90 days for years and stays 90 days under ECL.
- Saying doubtful = NPA for 12 months. Doubtful = substandard for 12 months (so roughly 15 months after the first default).
- Giving 15% for unsecured substandard loans. Unsecured substandard needs 25%.
- Thinking ECL started in 2026. The rules were finalised in April 2026 but apply from 1 April 2027.
- Mixing SMA-1 (31-60 days) with SMA-2 (61-90 days).
NPA Questions with Answers (Practice Set)
- A term loan becomes an NPA when it is overdue for more than how many days? Answer: 90 days.
- What is the provision for a secured substandard asset? Answer: 15%.
- An unsecured substandard exposure needs what provision? Answer: 25%.
- A loan overdue for 45 days is classified as? Answer: SMA-1.
- A doubtful asset is one that has remained substandard for how long? Answer: 12 months.
- What is the provision on the secured portion of a doubtful asset (1 to 3 years)? Answer: 40%.
- Standard asset provision for Commercial Real Estate loans is? Answer: 1%.
- From which date will RBI's ECL framework apply to commercial banks? Answer: 1 April 2027.
- Under ECL, a Stage 2 asset needs which kind of loss allowance? Answer: lifetime expected credit loss.
- Gross NPA ₹800 crore, provisions ₹600 crore. What is the PCR? Answer: 75% (600 ÷ 800 × 100).
Practise in the IBPS and SBI PO Banking Awareness Mock Test 01 and IBPS and SBI Clerk Banking Awareness Mock Test 02.
NPA Classification and Provisioning FAQs
What is the NPA period as per RBI in 2026?
90 days. A loan is an NPA when interest or principal is overdue for more than 90 days. RBI has kept the same rule in the ECL framework that starts on 1 April 2027.
What are the provisioning norms for substandard, doubtful and loss assets?
Substandard: 15% (25% if unsecured). Doubtful: 100% of the unsecured part, and 25%, 40% or 100% of the secured part for up to 1 year, 1 to 3 years and over 3 years. Loss: 100% or write-off.
What are SMA-0, SMA-1 and SMA-2?
Special Mention Accounts flag early stress: SMA-0 is overdue up to 30 days, SMA-1 more than 30 up to 60 days, and SMA-2 more than 60 up to 90 days. After 90 days the account becomes an NPA.
When does the ECL framework start in India?
From 1 April 2027 for commercial banks (other than small finance banks, payments banks and local area banks), under RBI's final Directions issued on 27 April 2026.
Practice Next
- Mock tests: IBPS and SBI PO Banking Awareness Mock Test 01, IBPS and SBI PO Banking Awareness Mock Test 02 and IBPS and SBI Clerk Banking Awareness Mock Test 01.
- Related notes: Basel norms 1, 2, 3 difference, CRR and SLR rate 2026, banking terms A to Z, priority sector lending targets and types of cheques in banking, plus important banking acts in India.
- Browse all study notes.