PRU 4.5.4

(1) An Authorised Person must establish clearly defined criteria for identifying its problem credits and/or impaired assets which ensure that credits are classified as impaired in all cases where there is some reason to believe that all amounts due (including principal and interest) will, or may, not be collected in accordance with the contractual terms of the loan agreement.
(2) For the purpose of (1), and subject to (3), an Authorised Person must categorise its credits into five categories as detailed in the following table, where credits in the substandard, doubtful and loss categories must be considered as problem credits:
Standard includes credits with no element of uncertainty about timely repayment of the outstanding amounts, including principal and interest. Credits are currently in regular payment status with prompt payments.
Special mention includes credits with deteriorating or potentially deteriorating credit quality which, may adversely affect the borrower's ability to make scheduled payments on time. The credits in this category warrant close attention by the Authorised Person.
Substandard includes credits which exhibit definitive deterioration in credit quality and impaired debt servicing capacity of the borrower.
Doubtful includes credits which show strong credit quality deterioration, worse than those in substandard category, to the extent that the prospect of full recovery of all the outstanding amounts from the credit is questionable and consequently the probability of a credit loss is high, though the exact amount of loss cannot be determined yet.
Loss includes credits which are assessed as uncollectable and credits with very low potential for recoverability of amounts due.
(3) An Authorised Person may also have in place a more detailed credit grading system provided it can address the categories detailed in (2).