CONTROL AND RECOVERY OF

NON PERFORMING ASSETS OF

BANKS IN INDIA
-SYBMS DIVISION B
 DEFINITION

A ‘non-performing asset’ (NPA) is defined as a

credit facility in respect of which the interest
and/or instalment of principal has remained
‘past due’ for a specified period of time.
CATEGORIES OF NON PERFORMING ASSETS

• STANDARD ASSETS
• SUB-STANDARD ASSETS
• DOUBTFUL ASSETS
i. D-I DOUBTFUL UPTO ONE YEAR
ii. D-II DOUBTFUL UPTO TWO YEARS
iii. D-III DOUBTFUL UPTO THREE YEARS
• LOSS ASSETS
PAST AND PRESENT OF NON PERFORMING
ASSETS

BEFORE 31ST 31ST MARCH, 2001-

MARCH, 2001 31ST MARCH, 2004
• 30 DAYS PAST DUE • 180 DAYS PAST
DUE
 PAST AND PRESENT OF NPA

FROM 31ST MARCH, 2004

• A npa shall be a loan or advance where for a period of more
than 90 days:
• Interest and/or installment of principal remains overdue
• Account remains ‘out of order’
• Bills purchased and discounted remains overdue
• Any amount receivable remains overdue
• Interest and/or installment of principal remains overdue for
harvest seasons but for a period not exceeding two half years
in the case of an advance granted for agriculture purpose
REASONS BEHIND NON PERFORMING ASSETS

INTERNAL FACTORS EXTERNAL FACTORS

• DIVERSION OF FUNDS • RECESSION

• BUSINESS FAILURE • PRICE ESCALATION

• INEFFICIENCY IN • CHANGE IN GOVERNMENT

MANAGEMENT POLICIES

• SLACKNESS IN CREDIT • INPUT/POWER SHORTAGE

MANAGEMENT
 CONTROL OVER NPA’S

Formation of CREDIT
INFORMATION Release of WILFUL
BUREAU (INDIA) DEFAULTER’S LIST
LIMITED (CIBIL)

Reporting of frauds Norms of lender’s

to RBI liability
Risk assessment
Reporting quick
and risk
mortality cases
management

Special mention
accounts
METHODS OF RECOVERY OF NPA’S

Compromise
Restructuring and
Settlement Lok adalats
Rehabilitation
Schemes
• Banks design • Re- • Up to Rs. 20 lacs
and implement schedulement • Speedy recovery
their own of payment of • Less expensive
policies interest and
principal
METHODS OF RECOVERY OF NPA’S

Corporate debt
Sale of NPA DRT
restructuring
• Rs.10 crores & • without • Application for
above recourse basis recovery of dues
• timely and • Buyer holds for • Issue of
transparent at least 15 recovery
• ICA months certificate
• Difficult to agree • NPA for • Sale by an
minimum two auctioneer
years
METHODS OF RECOVERY OF NPA’S

Code of Civil National Company

BIFR AND AAIFR
Procedure Law Tribunal
• below Rs.10 lacs • board of • measure
• orders Directors make competence,
restraining a reference performance &
debtor & pass • prepare a services of
orders for scheme for its bankruptcy
property revival court
• open public • time consuming • quality & skills
auction process of judges?
 METHODS OF RECOVERY OF NON
PERFORMING ASSETS
The Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act,
2002(SARAFESI)
• security interests in movable & immovable property.
• Provide a written legal
• Takeover the management of the secured assets
• ARCs can recover dues
• differentiation between first charge holders &
second charge holders
 CONCLUSION

• Change in bureaucratic attitude of banks

• A look beyond the balance sheets
• Avoid run in the herd behaviour
• Decrease dependence on courts and tribunals
 BIBLIOGRAPHY

• ARTICLE BY ANIL CHAWLA FROM SAMARTH

BHARAT
• www.rbi.org.com
• REPORT ON NPA’S – www.scribd.com
• www.indianmoney.com
• www.igidr.ac.in
• www.indiastudychannel.com
 THANK YOU
• POOJA AGGARWAL 101
• TANMAY AGRAWAL 102
• KEWAL GALA 108
• POOJA JAIN 112
• HITAKSHI MAHESHWARI 117
• SHWETA MALHOTRA 118