CA Inter P5 · Chapter 10 · Question 4 of 11
Under RBI norms, a cash credit or overdraft account is treated as 'out of order' when:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The outstanding balance remains continuously in excess of the sanctioned limit or drawing power for 90 days, or there are no credits continuously for 90 days or credits are insufficient to cover interest debited during the period
Explanation
RBI norms treat a CC/OD account as out of order if the outstanding balance remains continuously in excess of the sanctioned limit or drawing power for 90 days, or where the balance is less than the limit/DP but there are no credits continuously for 90 days as on the balance sheet date or credits are not enough to cover interest debited. An out-of-order account becomes an NPA.
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