During the statutory audit of Fair Bank, you are examining the Cash Credit account of M/s Bright Traders as at 31st March, 2025. The following facts…

In the given case, the borrower is enjoying a cash credit facility of 4crore and the outstanding balance as on 31st March 2025 is 4.10 crore. The excess over limit has continued only for 15 days. The latest stock statement available with the bank is dated 31st January 2025, which is within three months from the balance sheet date. The renewal of the limit, though due, is under process. Interest is being serviced regularly and no amount is overdue beyond 90 days. Banks should not classify an advance account as NPA merely due to the existence of some deficiencies which are temporary in nature such as non-availability of drawing power based on latest available stock statement, balance outstanding exceeding the limit temporarily and non-renewal of limits on the due date. However, stock statements relied upon by the banks for determining drawing power should not be older than 3 months. The outstanding in the account based on drawing power calculated from stock statements older than 3 months are considered as irregular. Since the deficiencies in the account are purely temporary in nature, drawing power is based on stock statement not older than three months, and the account has not remained out of order for more than 90 days, the account should not be classified as NPA. Accordingly, the treatment of the account as a Standard Asset by the branch is in accordance with RBI IRAC norms.