Classification of loan and advance
• Banks shall classify all exposures, whether the exposures have pre-
established repayment programs or not, into the following five
classification categories using the criteria described below:
1. Pass :- Any exposures, for which there has not been significant
increase in credit risk since initial recognition shall be classified under this
category. Exposures in this category are fully protected by the current
financial and paying capacity of the borrower and are not subject to
criticism.
2. Special mention
Special Mention are exposures for which there has been a significant increase in credit risk.
The special mention exposures may include, but not limited to, the following:
a) exposures with pre-established repayment programs past due thirty (30) days or more, but
less than ninety (90) days;
b) exposures that do not have a pre-established repayment program, if:
i. the debt remains outstanding for thirty (30) consecutive days or more beyond the
scheduled payment date or maturity, but less than ninety (90) days; or
ii. the debt exceeds the borrower’s approved limit for thirty (30) consecutive days or more,
but less than ninety (90) days; or
iii. interest is due and uncollected for thirty (30) consecutive days or more; but less than
ninety (90) days; or
iv. . for overdrafts, the account has been inactive for thirty (30) consecutive days or
more, but less than ninety (90) days or the account shows a debit balance of one to
four percent (1% to 4%) of the approved limit at least once over three hundred sixty
(360) days preceding the loan review period, which shall be end of every calendar
quarter.
3. Substandard
Without prejudice to the classification criteria, the following nonperforming exposures, at a
minimum, shall be considered substandard:
a) exposures with pre-established repayment programs past due ninety (90) days or more,
but less than one hundred eighty (180) days;
b) exposures including overdrafts that do not have a pre-established repayment program, if:
i. the debt remains outstanding for ninety (90) consecutive days or more beyond the
scheduled payment date or maturity, but less than one hundred eighty (180) days;
ii. the debt exceeds the borrower’s approved limit for ninety (90) consecutive days or
more, but less than one hundred eighty (180) days; or
iii. interest is due and uncollected for ninety (90) consecutive days or more; but less than
one hundred eighty (180) days; or
iv. for overdrafts, the account has been inactive for ninety (90) consecutive days or
more, but less than one hundred eighty (180) days or the account shows debit balance
of five to nineteen percent (5% to 19%) of the approved limit, at least once over three
hundred sixty (360) days preceding the loan review period, which shall be end of every
calendar quarter.
4. Doubtful
The following exposures, at a minimum, shall be classified doubtful:
a) exposures with pre-established repayment programs past due one hundred eighty (180)
days or more, but less than three hundred sixty (360) days;
b) exposures (including overdrafts) that do not have a pre-established repayment program,
if:
i. the debt remains outstanding for one hundred eighty (180) consecutive days or more
beyond the scheduled payment date or maturity, but less than three hundred sixty (360) days;
or
ii. the debt exceeds the borrower’s approved limit for one hundred eighty (180)
consecutive days or more, but less than three hundred sixty (360) days; or
iii. interest is due and uncollected for one hundred eighty (180) days or more, but less
than three hundred sixty (360) days; or
iv. for overdrafts, the account has been inactive for one hundred eighty (180) consecutive
days or more, but less than three hundred sixty (360) days; or the account shows debit
balance of twenty to forty nine percent (20% to 49%) of the approved limit, at least once
over three hundred sixty (360) days preceding the loan review period, which shall be end
of every calendar quarter.
5. Loss
Loss The following non-performing loans and advances, at a minimum, shall be classified
loss:
a) exposures with pre-established repayment programs past due three hundred sixty (360)
days or more;
b) overdrafts and loans or advances that do not have a pre-established repayment
program, if:
i. the debt remains outstanding for three hundred sixty (360) consecutive days or more;
or,
ii. the debt exceeds the borrower’s approved limit for three hundred sixty (360) consecutive
days or more; or
iii. interest is due and uncollected for three hundred sixty (360) days or more; or
iv. for overdrafts, the account has been inactive for three hundred sixty (360)
consecutive days or more; or the account shows a debit balance of fifty percent (50%)
and above of the approved limit at least once over three hundred sixty (360) days
preceding the loan review period, which shall be end of every calendar quarter.
