Non Performing Assets-sesameindia

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Controlling
Non-Performing Assets (NPAs) All your bank must
know!
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Introduction
The Non-performing Assets have been harrowing
Indian banking system for a long time now, so
much so that it is impacting the GDP and overall
economy of the country. Earlier this year, it
was predicted that the NPA levels will surge
close to 10.5 in March 2018. Banks, regulatory
bodies and the government of India together have
been trying to control the mounting numbers of
NPA through several means such as
SARFAESI Act, 2002

Debt Recovery Tribunals (DRTs)
Asset Reconstruction Companies (ARCs)
And others
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NPA recovery remains a big challenge
It is witnessed that over the years, NPA recovery
has been going down in spite of stricter laws and
better recovery methods in place.
THE DROP IN NPA RECOVERY OVER THE YEARS
248,200
221,400
Recovered NPAs (In ) Recovered NPAs (In crores)
Total NPAs (In crores)
173,800
105,700
32,000
30,800
23,300
22,800
22.00
18.40
12.40
10
-
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Ways to control NPAs

• Rational lending of loans to borrowers
• Banks and financial institutions must be more
  sensible by following a conservative approach for
  loan disbursement e.g. the repay- ment tenure
  should not be stretched for a longer duration.
• Loan restructuring is not the only option
• Recovery of loans must be ensured right from the
  time when the applicant applies for a loan to
  secure timely payment of instal- ments. Banks
  must not wait for accounts to become delinquent
  after which they have to end up with loan
  restructuring.
• Use of technology
• Innovative means of recovering bad loans must be
  adopted. Banks must consider investing in advance
  tools having features like Early Warning
  Signals, Loan Origination Systems etc. for
  streamlined lending and recovery practices.

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Ways to control NPAs (Cont.)
Amending the Banking Regulations Act RBI must
bring in amendments to track and monitor large
borrowers and big defaulters. Stricter rules for
Oversight Committee (OC) and Joint Lenders
Forum (JLF) must be introduced without any
further delay. Stringent Recovery Smart
practices to assess risks and red-flag borrowers
who tend to default must be adopted as a
preventive measure over and above the current
recovery modes like SARFAESI, IBC and more.
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Other Possible Ways of minimising NPAs
Mission Indradhanush (2015), Insolvency and
Bankruptcy Act (2016) Bad Banks (2017) These are
some ways of controlling and reducing NPAs that
are yet to prove themselves and deliver the
desired outcomes. It would be interesting to see
how these approaches perform in the coming times
and add to the economic growth of our country.
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