7.

B Segregation of Divisions

Yes Bank opted to transfer its stressed assets to another division, which functioned as an in-house subsidiary to
manage bad loans and purchase bad assets from other lenders. A separate infrastructure was established, and equity
partners were hired to manage the subsidiary. This approach helped in keeping the good bank separate from the bad
bank and enabled the bank to focus specifically on the recovery process of bad assets.

7.C Early and Active involvement of Legal Advisors

Legal advisors can assist in managing debts and resolving issues that arise when debts are not repaid. It is essential
to ensure compliance and inform government and financial authorities of any potential issues with loans, and to take
appropriate steps as early as possible. Legal advisors can take various measures, such as:
• Scrutinizing the Know Your Customer (KYC) details.
• Identifying disputed properties from records.
• Identifying charges and past defaults.
• Analyzing the investment pattern.
• Reviewing the shared documents.
• Understanding potential owner of assets by identifying disclosed/undisclosed entity structures & mapping
the family tree.
• Understanding other business interests that may lead to other asset ownership or investments in future.

7.D Preventive Measures

• Evaluate borrower’s CIBIL score.
• Compromise or use various settlement
schemes.
• Actively circulate information
defaulters.
• Take strict action against large NPAs.
• Use Asset Reconstruction Company.
• Special Mention Accounts – Additional
Precaution at the Operating Level.
• Use alternative dispute resolution mechanisms for
faster settlement of dues such as Lok Adalat and Debt
Recovery Tribunals.
of • Legal Reforms such as implementation of the
Insolvency and Bankruptcy Code have already taken
place.
• Corporate Debt Restructuring (CDR).
• Propose guidelines on wilful defaults/diversion of
funds.