What are the five levels of credit classification

When we look at the credit report, we can see in the five levels of classification in the column of normal, concern and other labels, so what are the five levels of credit classification? What does it mean?

What are the five levels of credit classification?

The five levels of credit classification, in fact, refers to the loan risk classification method. According to the Guiding Principles of Loan Classification (Yinfa [2001] No. 416) issued by the People's Bank of China, loans are categorized into five categories according to their level of risk: normal, concern, substandard, doubtful and loss, with the latter three categories collectively referred to as non-performing loans.

What do the five levels of credit classification mean?

1 Normal: The borrower is able to fulfill the contract and there is no sufficient reason to suspect that the principal and interest of the loan cannot be repaid in full and on time.

2Concern: Although the borrower is currently capable of repaying the principal and interest of the loan, there are some factors that may adversely affect the repayment.

3 Subordinate: the borrower's repayment ability has obvious problems, and it is unable to fully repay the principal and interest of the loan solely by relying on its normal business income, and even if the guarantee is enforced, it may still result in certain losses.

4 Doubtful: the borrower is unable to repay the principal and interest of the loan in full, and even if the guarantee is enforced, it will surely result in a large loss.

5 Loss: After taking all possible measures or all necessary legal procedures, the principal and interest still cannot be recovered or only a very small portion can be recovered.

The above is the answer to the credit five classifications have which five categories, I hope to help you.