## Prudential Norms – Government Guaranteed Advances (Bank Audit)
### The Core Distinction: Central vs State Government Guarantees
For advances overdue for more than 90 days:
| Guarantee Type | Asset Classification | Income Recognition |
|---|---|---|
| Central Government (not invoked/repudiated) | Standard Asset | Treated as NPA (income NOT recognized on accrual) |
| State Government | NPA | Treated as NPA (income NOT recognized on accrual) |
> Key insight: Central Govt. guarantee protects the classification (avoids NPA tag for provisioning) but NOT income recognition — interest income is still not accrued.
### SMA Classification (Advances not overdue > 90 days)
For both Central and State Govt. guaranteed advances not yet in NPA territory:
| Category | Criteria |
|---|---|
| Standard Regular | Accounts not overdue |
| SMA-0 | Showing stress signals |
| SMA-1 | Overdue between 31–60 days |
| SMA-2 | Overdue between 61–90 days |
### Income Recognition (≤ 90 days overdue)
For both Central and State Govt. guaranteed advances where accounts are not overdue for more than 90 days — income is recognized on accrual basis.