An NBFC has a std asset (Loan Receivable of Rs 1 lakh) and interest receivable on that loan Rs 2500 In the BS.
Provision on Std assets is 0.25% as per RBI rule.
What is the amount of Provision to be kept?
Rs 250 (1 Lakh * 0.25%) or Rs 256.25 (102500 * 0.25%)
I think its on principal amount and not on Principal Cum Interest
It may also depend upon the terms and conditions of the loan, if at the time of interest falling due, the interest becomes part of loan then on both considered together, in that case also, if interest payment is seen to be regular in past then it cannot be taken for the purpose of standard loan. Because the standard loan itself means that on which interest payment is regular. So by the time u are preparing ur balance sheet, u have already received the interest fallen due Rs, 2500/- so ideally take only principal amount.
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