MNB bank advanced certain loans guaranteed by government. State the prudential norms for asset classification and income recognition of such loans.

Government Guaranteed Advances (In case of accounts overdue for more than 90 days): Central Government. Guaranteed Advances, where the guarantee is not invoked/ repudiated would be classified as Standard Assets, but regarded as NPA for Income Recognition purpose. The situation would be different if the advance is guaranteed by State Government, where advance is to be considered NPA if it remains overdue for more than 90 days for both Provisioning and Income recognition purposes. Alternative Solution: Government Guaranteed Advances (In case of accounts overdue for not more than 90 days): Asset Classification: In case of advances guaranteed by both Central Government and State Government, they would be classified as Standard Advances in the following manner: Classification of Advances Particulars Standard Regular Accounts not overdue Special Mention Accounts: 1. SMA 0 Accounts showing stress signals 2. SMA 1 Accounts overdue between 31 to 60 days 3. SMA 2 Accounts overdue between 61 to 90 days Income Recognition: Income would be recognised for all the accounts which are not overdue for more than 90 days, on accrual basis, in case of advances guaranteed by both Central Government and State Government.