If a loan account is declared as NPA by the banks whether company can provide interest on same.
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NPA account can company provide interest
Replies (5)
Quick Summary
Could be if it fails the sppi test because it includes principal payments.
If the account is sub standard asset then bank may charge Interest on such loan but if it is loss asset then no interest is charged by bank on such loan then bank can go for auction
Dear Yasaswi and Sourav,
Thank you for your response.
My query is whether company can provide interest (.i.e Interest provision on outstanding principle and Interest) who's account is NPA.
If provided what will be the consequences or vice-versa.
It will be grateful if you can provide reference to any AS, Ind AS or Guidance note.
IndAS it is possible. But it is advisable not to create too many provisions. Incase if you want to provide for it
Accrued interest payable a/c
To Provision a/c
(this is possible if your loan account is not closed and your financial guarantee not impounded)
or else you can leave it in the accrued interest account. I need to verify with the document what will happen and treatment for financial guarantee becoming NPA. I’ll get back if anything important is there soon.
Meantime, if the loan is completely closed, write off financial guarantee loss.
https://mca.gov.in/Ministry/pdf/INDAS109.pdf
B4.1.13- treatment is prescribed here for various types of debt. Also banks collateral treatment is given in B5.4.9 (I’m sure there is no special IndAS for banks)
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