By S&S Co. Advocates & Solicitors · Published 24 September 2026 · Informational content, not legal advice — see our disclaimer
The 90-Day Rule
Under RBI's Prudential Norms on Income Recognition, Asset Classification and Provisioning (IRACP), an account is classified as a Non-Performing Asset once interest or principal remains overdue for more than 90 days. Classification made on or after the 90th day of continuing irregularity is treated as valid — courts have specifically rejected the argument that classification made exactly on the 90th day is 'premature', holding instead that it strictly follows the rule rather than jumping ahead of it.
What a Bank Must Do Before and Around Classification
RBI's fair-practices expectations require banks to follow their own Board-approved recovery policy, including giving the borrower adequate notice or intimation, in the period before and around NPA classification. That said, classification itself is a prudential and accounting determination rather than a quasi-judicial order, so it does not require a personal hearing at that specific stage in the way, for example, a SARFAESI enforcement measure might.
Where the Real Challenge Lies: Computation, Not the Rule Itself
A borrower who believes classification was premature or procedurally flawed — for instance, because the 90-day overdue period was wrongly computed, or because payments were misapplied against the account — can raise this directly with the bank's grievance or nodal officer in the first instance, and escalate to the Banking Ombudsman under the RBI Integrated Ombudsman Scheme if the dispute is not resolved.
It is important to be realistic about what actually succeeds here: since courts have upheld classification made strictly on the 90th day as lawful, a challenge to classification only succeeds by demonstrating an actual computational, procedural, or documentary error in how the 90-day period or the account's payment history was calculated — not by disputing the validity of the 90-day rule itself, which is settled.
Once SARFAESI Enforcement Follows
Where a Section 13(2) SARFAESI demand notice follows an NPA classification, a borrower who disputes either the classification or the specific measures taken under Section 13(4) can file a Securitisation Application under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal. It is worth keeping the concepts distinct: NPA classification is an internal, prudential tag carrying credit-reporting consequences; 'wilful defaulter' classification is a separate and more serious designation; and SARFAESI enforcement action is yet another distinct step — each carries its own consequences and its own procedural safeguards, and a borrower's strategy should address whichever of these is actually in play.
Frequently Asked Questions
After how many days overdue does a loan become an NPA?
Generally more than 90 days of continuing overdue principal or interest, under RBI's Prudential Norms on Income Recognition, Asset Classification and Provisioning.
Can a borrower successfully argue that NPA classification on the exact 90th day was premature?
No. Courts have held that classification made on or after the 90th day of continuing default is lawful and not premature — the classification itself, made correctly, is not open to challenge on that basis.
What is the real ground on which an NPA classification can be challenged?
An actual computational, procedural or documentary error — for example, the 90-day period being wrongly calculated or payments being misapplied — rather than a challenge to the validity of the 90-day rule itself.
Where can a borrower escalate a classification dispute that the bank won't resolve?
To the Banking Ombudsman under the RBI Integrated Ombudsman Scheme, after first raising the issue with the bank's own grievance or nodal officer.
References & Further Reading
This article references the following statutory provisions. Readers should always verify current rules, fees and timelines against the applicable statute and rules as amended, since these are revised from time to time.
- RBI Master Direction / Circular on Income Recognition, Asset Classification and Provisioning (IRACP) norms, as amended.
- SARFAESI Act, 2002, Sections 13 and 17.
- RBI Integrated Ombudsman Scheme, current version.