NPA

and METHODS OF RECOVERY

A presentation by IOB
STAFF COLLEGE
2016
 Where do we stand ?
(Rs in crores )

30.9.2013 30.9.2014 30.9.2015 31.12.2015

G NPA 8232 (4.65%) 13334 (7.35%) 19424 ( 11%) 22672 (12.64%)
N NPA 4875(2.83%) 9109 (5.17%) 12539(7.41%) 14174(8.32%)
C PROVN 3357 4225 6885 8498
Inc in provn 868 2660 2613
Op Pr(Ave)/qr 990 625
Net loss 1425
 Recovery Policy currently in force
• MASTER / 48 /2013-14 dated 8.11.2013 by ARD
• Valid for one year or till new policy (with amendments from time to
time)
• E aucion Vs Manual Auction of securities-MOF guidelines
• Ministry of Finance has advised the banks that all auction of Properties
through DRTs shall be only by way of e-auction and subsequently
extended the eauction process for SARFAESI auction also
• Subsequent relaxation permitted the Board of respective banks to form
suitable policy.
• Our Bank’s Board has permitted branches to conduct manual auction
through SARFAESI act in cases where the book outstanding at the time
of auction is less than Rs.5 lacs or the forced sale value of the property
being brought for Auction is less than Rs 5lacs.
 Recovery Policy currently in force

• Ministry of Finance has also advised that in respect

of value of Securities upto Rs.1 crore, the Property
shall be brought to auction atleast once
• And
• for properties with value above Rs.1 crore, the
properties shall be brought to auction at least twice
• prior to resorting to sale through private treaty
under SARFAESI Act.
BANK’S RECOVERY POLICY-Major focus:
• To ensure arresting slippages by initiating timely remedial
action whenever the advance becomes irregular
• To ensure Considerable reduction in Non Performing Assets by
upgradation and recovery
• To Recover MINIMUM 20% in respect of prudential write
off accounts every year. (As per Ministry of Finance
guidelines)
• Regions should ensure that the slippage cap fixed to
them is not exceeded.
• If exceeded, it should be compensated by equal cash
recovery towards NPA reduction / Upgradation.
 methods for recovery

Adjusting the permitted Credits

• Eligible subsidy /
• margin money /
• liquid securities
• must be credited immediately on classification
of NPA
 Persuasion / Personal contacts with the
Borrower / guarantor
• the borrowers / guarantors are to be
contacted at frequent intervals and persuade
them to upgrade / close the NPA account.
• The latest contact address / details and other
particulars of the borrowers / guarantors /
securities / condition of the units / business
activities must be recorded so that the bank is
not put to loss for want of details.
 upgradation of NPA account
Recovering critical / overdue amount
• Recovering the critical / overdue amounts.
• Re-structuring / Re-phasing / Rehabilitating the NPA
accounts wherever possible as per extant
guidelines.
• Implementation of rehabilitation / restructuring
package permitted by BIFR / CDR and ensuring
recovery as permitted.
• Whenever an account is upgraded one layer above
the sanctioning authority should review the
upgradation.
 Use of ethical measures
• Publishing the photograph of the eligible
defaulters as per the laid down norms.
• Identifying and classifying the willful
defaulters for submission to RBI / CIBIL as per
the RBI guidelines.
• Seeking help of the Govt. bodies / officials
should be utilized for recovery of all Govt.
Sponsored Loans
 Timely action under SARFAESI ACT 2002

• In the event of failure to upgrade the account

the actions under SARFAESI Act 2002 should
be initiated immediately for all eligible
accounts and
• subsequent actions should be followed on due
dates without fail till the recovery is made.
• SARFAESI action to be initiated on all eligible
accounts before completion of next quarter
from the date of classification of NPA.
Following with Official liquidator / ECGC /
CGFTSI
• Submitting the timely notice to Guarantee
Corporations as required and ensuring receipt
of claim amount at the earliest.
• Follow-up with Official liquidators to ensure
interim / full recovery of claim amount at the
earliest.
 Debt Recovery Agents

• Our Bank has formed a Policy for Engagement

of Recovery Agents vide Law Dept circular No.
Trans/E/11/2009-10 dt.18.1.10.
• Engagement of Sarfaesi Agents to assist the
Recovery officer is also detailed in the circular.
Sale of NPAs to ARCs / Banks / FIs / NBFCs

• The offer can be cash / Security Receipts / both and the total
of such offer shall not be less than the NPVs of the securities.
• The decision for sale shall be taken by Central Office and in
respect of individual accounts, the sanction shall be as per
the extant delegated powers and in respect of portfolio of
accounts, sanction shall be by the Management Committee
of the Board.
• Whenever Central Office decides to sell the selected NPA
accounts to ARCs and others, RO shall endeavour that they
submit the required details and carry out the Nodal centre
jobs required for due diligence.
 Legal Actions and filing of suits at
appropriate forums
• Normally, legal action thro’ Court / DRT should be
the last resort adopted for recovery of dues.
• Before initiating legal action, steps to be taken to
ensure recovery by probabilities for compromise
settlements, encashing liquid securities / disposal
of charged securities / exercise right of setoff etc.,
• After examining the pros and cons of filing suit
the following measures to be initiated:
 Legal Actions and filing of suits at
appropriate forums
• Serving legal notices
• Filing suit in civil court / DRT as per the case after
obtaining permission from appropriate layer of
authority.
• Invoking Revenue Recovery Acts wherever applicable.
• Referring to Lok adalats for settlement through
conciliation. The forum of Lok Adalats should be used
frequently as it is cost and time effective to take it to
decreed stage. In the event of failure to honour the Lok
Adalat commitments EP proceedings should be initiated
immediately.
 Legal Actions and filing of suits at
appropriate forums
• Filing ABJ and obtaining injunction order, seeking
interim orders wherever applicable.
• Vigorous follow-up of suit filed cases should be made
before due dates by contacting the lawyers and
providing whatever materials / details required by
them to avoid delay from our part.
• Liaison Officers to monitor the proceedings in DRT
cases by ensuring attendance of lawyers / branch
managers on hearing dates, carrying out
orders etc.,
 Legal Actions and filing of suits at
appropriate forums
• Invoking provisions under section 138 of NI
Act wherever applicable.(Dishonour of cheque
for inadequay of funds)
• File appeal / review / revision petition
wherever necessary within limitation period.
• Unnecessary adjournments should be
objected or cost should be insisted for every
unreasonable adjournment.
 Expeditious obtention of decree / RC
• Execute Decree / RC immediately, without waiting
upto the Limitation period provided as per Law, to
bring the securities for sale, attach and sell the
assets of the judgement debtors, seek Garnishee
orders, seek arrest of JD in the event of non
payment of decreed amount.
• Filing Insolvency petitions wherever desirable.
• Initiating criminal proceedings wherever necessary.
• Purchase and sale of non-banking assets acquired in
loan recovery proceedings.
Time Frame Norms for initiating
Legal Action
.No. Action to be initiated Time Frame

1 Enforcement / EP of RC/Decree issued Immediate.

2 Appropriation of liquid securities Immediately after NPA classification
3 Ascertaining about borrowers/ guarantors Immediately after NPA classification
whereabouts etc. & inspection of securities etc.

4 Discovery of assets of borrower/ guarantors not Immediately after NPA classification

secured to the Bank
5 Identification of staff lapses by Regional Office Within 30 days after NPA classification.
concerned
6 Rehabilitation / Restructuring / upgradation 35-45 days from the date of NPA classification.

7 Recall notice/notice under SARFAESI Act Within 30 days when the upgradation/rehabilitation
is ruled out.
8 Sale of pledged assets Simultaneous with recall notice
9 Decision to file suit Within 3 months from the date of NPA Classification.

10 SARFAESI notices, possession of securities and Within 6 months from the date of NPA Classification.
sale, including utilising Outsourcing agencies

11 Possession & sale of hypothecated securities 120 days from the date of recall notice.
relating to NPAs where SARFAESI notices are not
issued
12 Initiating appropriate legal action to recover Immediately after taking action as per S. No. 9 or 10
shortfall if any. above, as the case may be.
 FOCUS ON RECENT CIRCULARS
• Ref No ADV/PERM/607-2015-16 Dated 21.09.2015- Valid till
31.3.2016 (Issued by ARD)
• Delegation of Powers to Branch heads for settlement of Educational
loans upto Rs 4lacs not backed by any security.
• Norms for settlement
• Amount of recovery to be made
• SS asset -100% of amount disbursed less total repayment made by
the borrower
• Doubtful Asset- 75% of amount disbursed less total repayment
made by the borrower
• Loss Asset- 50% of amount disbursed less total repayment made by
the borrower.
• NOTE: Subsidy credited to a/c is not to be treated as Repayment by
the party.
• Applicable to loans sanctioned and O/S as on 31.3.15
 Focus on recent circulars (Ctd)
• Ref No ADV/PERM/623/2015-16 Dated
14.12.2015 (Issued by ARD)-Valid till 28.2.2016
• Delegation of powers to Branch heads to Settle
NPA accounts up to Rs 10 lacs as on 31.12.2014
• Norms
• A)NPAs under DOUBTFUL/LOSS a/c- O/s of Rs one lac and
below-As on 31.12.14-with 100% provision held-
• Settlement _Min 50% of o/s as on 31.12.14 less recovery made
after 31.12.14 with discretion to write off bal upto Rs 50000 or
actual)
 Ref No ADV/PERM/623/2015-16 Dated 14.12.2015 (Issued by
ARD)-Continued –Valid till 28.2.16

• B) NPAs under DOUBTFUL/LOSS a/c- O/s of Rs ten lac and below-As on

31.12.14-
• Settlement- Min 75% of Book o/s as on 31.12.2014 less recovery made
after 31.12.2014 with discretion to write off up to Rs 2.50 lacs or actual .
• In case of write off accounts Min 75% of o/s at the time of write off less
the amount recovered at the time of write off .
• C) NPAs under SUBSTANDARD category- O/s of Rs ten lac and below-As
on 31.12.14-
• Settlement- Min 85% of Book o/s as on 31.12.2014 less recovery made
after 31.12.2014 with discretion to write off upto Rs 1.50 lacs or actual.
• Note: Undebited interest may not be reckoned for settlement of NPAs
 WHERE WE SHOULD GO?
• There are miles to go • Every IOBean can
contribute in this journey
• Before we can Rest towards survival and
• Survival is the need success.
• CASA should increase
of the hour
• Non operating expenses
• Retention of identity should come down
is of paramount • NPA slippage to be avoided
importance • Para banking products
should be marketed
relentlessly.
 Sum up
• NPA poses the grave danger to BANKING
• It reduces not only present income but also future
ones.
• Both ALM and Liquidity suffer
• Capital adequacy requirements go up on account of
NPA.
• Every drop constitutes an ocean. Every recovery of
Debt adds to bottom line of profit.
• Contribute in every possible way for prevention of
slippage to NPA.
END

• Thank You all

• Wish you better
recovery !!