Recovery and NPA Management
Presentation by
A.L.Paranjape
RECOVERY AND NPA MANAGEMENT
Preventive Methods
The preventive methods includeMore careful and responsible scrutiny and appraisal.
This includes timely
sanction, realism in fixing repayment schedule and
adequacy of credit with efficient delivery.
Evolving a broad loan recovery policy and
implementing through the cadres with adequate
accountability and empowerment.
Regular and effective follow up with borrowers and
timely action on sensing the likely default
Title, value, etc. and additional security are to be
investigated before the disbursement of loan.
More detailed information about the borrowers is
to be obtained in terms his/her family
background such as
i) size of the family
ii) number of dependents in the family
iii) earning members in the family
iv) standard of living
v) length of residency in the area, etc.
Reviewing the advances in time and taking
appropriate immediate action.
Sending demand notices in time.
Contacting the borrower before the harvest or
cash inflow.
Proper supervision of the borrowal account
through personal visits and calling for periodical
returns to get incipient signals of default.
Efficient MIS system on the borrowers and on the
branches
Credit rating of clientele.
Developing an early warning system for
identifying potential weakness in the accounts.
Strict observance of time schedules.
Timely extension of period of limitation through
debt acknowledgement,
partial payment, renewal of documents etc.
Timely rephasement or rescheduling of loan in
the event of natural calamities.
Recovery Strategies
effect recovery
compromises to improve recovery status of
account
partial write off
adjustment of collateral securities
pressure on guarantor
special recovery drive
help from revenue authorities
Rephasement of loans or Rescheduling of demands
Rehabilitation of potentially viable units
Compromise with borrowers for final settlements
Calling up the advances and filing of civil suits
Approaching debt recovery tribunals
Settlement of claims with Deposit Insurance and Credit
Guarantee Corporation of India (DICGCI) and Export
Credit Guarantee Corporation of India (ECGCI).
Write off the outstanding
SARFAESI
THE SECURITISATION AND RECONSTRUCTION OF
THE FINANCIAL ASSET AND ENFORCEMENT OF
SECURITY ACT 2002.
The act was passed in 2002.
It has three segmentsa) Securitisation & Asset Reconstruction
Company.
b) Central Registry
c) Enforcement of Security Interest
It was passed to strengthen the hands of the
bankers for recovery of NPA.
SARFAESI Act 2002.
Security Interest ( Enforcement) Rules,2002.
The Enforcement of Security Interest and
Recovery of Debts Laws (Amendment) Act
2004.
Security Interest
It means right, title and interest of any kind
whatsoever upon property,
created in favour of any secured creditor
and
includes mortgage, charge, hypothecation and
assignment.
Criteria for invoking SARFAESI ACT
1.
2.
3.
4.
5.
Before invoking provisions of the act , please
ensure that following conditions are fulfilled in
the a/cContractual dues are = or> Rs.1.00 lakh.
There is default and a/c is having NPA status.
There is security interest in favour of bank.
Documents must be valid & limitation up to
next one year.
Period stated in notice should 60 day
6. Security document should be complete in all
respect & are enforceable.
7. We should be sole banker or in case of joint
lending, bankers with at least 75% stake
should agree for invoking provisions of
SARFAESI.
8. In case of multiple banking where security is
exclusively charged to the bank, bank can
invoke the provisions of the law.
Exemptions
Following advances are exempted under the act:
A/cs with contractual dues less than Rs.1.00 lac.
When the security for the advance was created on
agriculture land.
Where the contractual dues are < 20% of the
principal dues.
Assets are charged by way of pledge or lien.
Assets financed on hire purchase and lease terms
are beyond the purview of the act.