Guarenter of npa account

Dear Mr. Gopal

If an account is not classified as NPA inspite of expiry of 90 days, it is botheration of the bank and not your botheration. Before classification of  loan accounts as NPAs banks also strive hard for upgradation of the NPA accounts to Performing Assets (PAs) by accepting the defaulted arrears of the instalments together with interst and penalty for the delayed period. Classifying a loan account as NPA is not palatable any banl also as the banks have to provide for the account @ certain percentage out of profit untill recoverey, which will be burdensome to banks as it woul temporarily decrease of profits to banks. 

For classification of a loan account as NPA, Reserve Bank of India has issued guide lines and the bank has to follow the same. RBI guide lines provide that a loan account should be classified as NPA based on 'record of recovery '. 

The relevant guidelines of RBI are extracted and reproduced hereunder for your information.

"2.2.1 Record of Recovery

(i) The treatment of an asset as NPA should be based on the record of recovery. Banks should not treat an advance as NPA merely due to existence of some deficiencies which are of temporary in nature such as non-availability of adequate drawing power, balance outstanding exceeding the limit, non-submission of stock statements and the non-renewal of the limits on the due date, etc. Where there is a threat of loss, or the recoverability of the advances is in doubt, the asset should be treated as NPA.