Banking Exam Question - What are the Criteria & Provision of NRB to Blacklist for Debtor's Not Payable Loan? Explain

 

Introduction - Bad Debt & Receivable

Bad debt is debt that is not collectible and therefore worthless to the creditor. Bad debt is usually a product of the debtor going into bankruptcy but may also occur when the creditor's cost of pursuing the debt collection activities is more than the amount of the debt. Once a debt is considered bad, the business may be able to write it off as an expense on its income tax return.

Numerous organizations make deals using a loan, as it by and large enables them to expand their deals. Unavoidably, most organizations wind up offering acknowledge to customers for not as much as attractive credit, or they confront circumstances in which their customers can't pay. Subsequently, organizations that make credit deals frequently assess the measure of offers they hope to end up plainly terrible obligations, and they record this projection in their remittance for dubious records. Both individual and business borrowers with histories of awful obligations are probably going to have their FICO scores decay, which makes it troublesome for these account holders to get to any extra types of credit.
 

A bad debt recovery is business debt from a loan, credit line or accounts receivable that is recovered either in whole or in part after it has been written off or classified as a bad debt. Because it generally generates a loss when it is written off, a bad debt recovery usually produces income.