PQR Ltd. has been sanctioned a cash credit facility of ₹30 crores by ABC Bank Ltd. During the financial year 2025-26, the drawing power available to…

A cash credit account should be treated as 'out of order' if: the outstanding balance remains continuously in excess of the sanctioned limit/drawing power; or where the outstanding balance in the principal operating account is within the sanctioned limit/drawing power, there are no credits continuously for 90 days as on the date of the Balance Sheet; or credits are present but are not sufficient to cover the interest debited during the same period. In the given case, PQR Ltd. has been sanctioned a cash credit limit of ₹30 crores by ABC Bank Ltd. The drawing power available to the company ranged between ₹26 crores and ₹29 crores during the financial year 2025-26. The outstanding balance remained below ₹24 crores throughout the year and, therefore, did not exceed the sanctioned limit/drawing power. The amount outstanding in the cash credit account remained below ₹24 crores throughout the year. However, there were no credits continuously for 90 days as on 31st March 2026. Thus, although the outstanding balance was within the sanctioned limit/drawing power, there were no credits continuously for 90 days as at the Balance Sheet date. Therefore, the cash credit account of PQR Ltd. should be classified as an 'out of order' account in the books of ABC Bank Ltd. as on 31st March 2026. Hence, it would be considered NPA