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    Question

    Which of the following is true regarding the Reserve Bank of India's prudential norms for income recognition, asset classification, and provisioning for banks' advances portfolio?

    A The policy of income recognition should be subjective and based on record of recovery. Correct Answer Incorrect Answer
    B The classification of assets of banks has to be done on the basis of subjective criteria to ensure a uniform and consistent application of the norms. Correct Answer Incorrect Answer
    C The provisioning should be made on the basis of the period for which the asset has remained non-performing and the availability of security and the realizable value thereof. Correct Answer Incorrect Answer
    D Banks are not required to fix realistic repayment schedules on the basis of cash flows with borrowers. Correct Answer Incorrect Answer
    E The prudential norms are not aimed at improving consistency and transparency in the published accounts. Correct Answer Incorrect Answer

    Solution

    The provisioning should be made on the basis of the period for which the asset has remained non-performing and the availability of security and the realizable value thereof. Options A and B are incorrect because the policy of income recognition should be objective, and the classification of assets should be done on the basis of objective criteria. Option D is incorrect because banks are urged to ensure that realistic repayment schedules may be fixed on the basis of cash flows with borrowers. Option E is incorrect because the prudential norms are aimed at improving consistency and transparency in the published accounts.

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