In a loan a/c, the balance outstanding is Rs. 5 lacs and a cover of 75% is available from CGTMSE. Th

In a loan a/c, the balance outstanding is Rs. 5 lacs and a cover of 75% is available from CGTMSE. The a/c has been doubtful since 01.10.2011 and the value of security held is Rs. 2 lacs. What will be the total provision to be made for this account as on 31.03.2015? a. Rs. 500000 b. Rs. 275000 c. Rs. 225000 d. Rs. 75000 Ans - b Friends, actually in case the advance covered by CGTMSE guarantee becomes nonperforming, no provision need be made towards the guaranteed portion. The amount outstanding in excess of the guaranteed portion should be provided for as per the extant guidelines on provisioning for nonperforming advances. Please refer " rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx… ". Visit - 5.9.5 Advance covered by Credit Guarantee Fund Trust For Micro And Small Enterprises (CGTMSE) guarantee. So, Explanation : Outstanding balance = Rs. 5 lacs, Security available = Rs. 2 lacs CGTMSE cover of 75% available on the remaining amount = (500000 – 200000) x 75/100 = 300000 x 75/100 = 225000 We will take the uncovered amount for taking provision, which will be, 300000 - 225000 = 75000 Since loan is in doubtful category for more than 3 years, we will take 100 % Provision for security value. =200000 So total provision will be, 75000+200000 = 275000