Interview question

Originally posted by : Varun
	Hi fellow CCites, I had my Bank PO interview yesterday. One of the questions asked was- "A borrower has been regular and upto date in all his payments, but still the CA's contention is that the account should be classified as NPA. The contention of the CA is correct. Can you explain how is it so? The interviewer who asked the question said that this was an actual case, and he had supported the CA in his opinion, and the CA was actually correct. I have not encountered such a case in practical life, So, what's your opinion friends??!!

i) Banks should ensure that drawings in the working capital
accounts are covered by the adequacy of current assets, since current
assets are first appropriated in times of distress. Drawing power is required
to be arrived at based on the stock statement which is current. However,
considering the difficulties of large borrowers, stock statements relied upon
by the banks for determining drawing power should not be older than three
months. The outstanding in the account based on drawing power calculated
from stock statements older than three months, would be deemed as
irregular.

A working capital borrowal account will become NPA if such irregular
drawings are permitted in the account for a continuous period of 90
days even though the unit may be working or the borrower's financial
position is satisfactory.

ii) Regular and ad hoc credit limits need to be reviewed/ regularised not
later than three months from the due date/date of ad hoc sanction. In case of
constraints such as non-availability of financial statements and other data
from the borrowers, the branch should furnish evidence to show that
renewal/ review of credit limits is already on and would be completed soon.
In any case, delay beyond six months is not considered desirable as a
general discipline. Hence, an account where the regular/ ad hoc credit
limits have not been reviewed/ renewed within 180 days from the due date/
date of ad hoc sanction will be treated as NPA.