Standard Definition of Five-level Classification of Loans According to the Guiding Principles of Loan Risk Classification formulated by the People's Bank of China, loans can be divided into five categories according to the degree of risk: normal, concerned, secondary, suspicious and loss, and the latter three categories are collectively referred to as non-performing loans. The standard definition of five-level loan classification is as follows: risk classification | meaning | normal category | The borrower can perform the contract and fully repay the principal and interest on time. | Concern category | Although the borrower has the ability to repay the loan principal and interest at present, there are some factors that may adversely affect the repayment. There are obvious problems in the borrower's repayment ability, and it is impossible to guarantee the full repayment of principal and interest by relying on its normal operating income. | Suspicious category | If the borrower cannot repay the principal and interest in full, even if the mortgage or guarantee is implemented, it will definitely cause certain losses. | Loss category | After taking all possible measures and some necessary legal procedures, the principal and interest cannot be recovered, or only a small part can be recovered | II. According to the Guiding Principles of Loan Risk Classification (documentNo. China People's Bank [1998] 15 1), the main features of five types of loans are shown in the following table: Main features of five types of loans |. | concern category | 1 decrease in net cash flow; | 2 The sales revenue and operating profit of the borrower decline, or the net value begins to decrease, or there are signs of insufficient liquidity; | 3 Some key financial indicators of the borrower are lower than the industry average or have a great decline; | 4. The borrower has serious problems in operation and management, and fails to use the loan according to the specified purposes; | 5. The borrower has poor repayment willingness and does not actively cooperate with the bank.