NPA Management: N. L. D I M S & R

NPA MANAGEMENT
N. L. DALMIA INSTITUTE OF MANAGEMENT STUDIES & RESEARCH

SRISHTI, SECTOR 1, MIRA ROAD (E), MUMBAI 401 104
NPA Management
Submitted By:
Bhavika Thakker
PGDBM FINANCE
2007-09
Submitted To
Prof. Jot!"# Ar#
N.L.Dalmia Institute of
Management and Research [0]

NPA MANAGEMENT
CERTIFICATE
T$i! i! to %ertif t$#t Ms.Bhavika Thakker !tude"t of Po!t Gr#du#te Di&'om# i" M#"#(eme"t Studie!
)Fi"#"%e* b#t%$ of N. L. Dalmia Institute of Management Studies and Research $#! !#ti!f#%tori'
%om&'eted fi"#' &ro+e%t o" NP MN!"M"NT# u"der m !u&er,i!io" #"d (uid#"%e #! &#rti#'
fu'fi''me"t of re-uireme"t of PGDBM %our!e. #&&ro,ed b AICTE for t$e e#r 2007-09.
Signature: Signature:
Prof. Jot!"# Ar# Prof. P. /. Ar#
)Pro+e%t Guide* Dire%tor
P'#%e0 Mumb#i
D#te0 1230132009

NPA MANAGEMENT
ACKNOWLEDGEMENT
No e"de#,or #%$ie,e! !u%%e!! 4it$out t$e %oo&er#tio" of ot$er! 4$i%$ (oe! # 'o"( 4# i" !$#&i"( #"d
formu'#ti"( # &ro+e%t.

I t#5e t$i! o&&ortu"it to e6te"d m $e#rtfe't (r#titude to Pr!. P. L. Ar"# #"d m &ro+e%t (uide Pr!.
$"%&'# Ar"# 4$o $#! (uided me t$rou($ t$e dur#tio" of t$e &ro+e%t 4it$ &#tie"%e #"d $e'&ed
4$ere,er I f#'tered.
/#!t but "ot t$e 'e#!t I 4ou'd 'i5e to t$#"5 m &#re"t!. #'' m frie"d! #"d !t#ff member! of N. /. D#'mi#
I"!titute of M#"#(eme"t Studie! #"d 7e!e#r%$ 4$o $#,e %o"!t#"t' !u&&orted me i" #'' m e"de#,or!.
M&. B(#)*+# T(#++,r
PGDBM (F*'#'-,) .00/001

NPA MANAGEMENT
N. L. D#23*# I'&%*%4%, O! M#'#5,3,'% S%46*,& #'6 R,&,#r-(, M437#*.
PRE!"E
#his $ro%ect re$ort titled &NP! Management' descri(es the Non)
$erforming !ssets *NP!s+ in the (an,ing sector - the .arious $olicies
laid do/n (0 the R1I as /ell as $u(lic sector (an,s for their e2ecti.e
management - control. It co.ers the 3!R!E3I !ct4 2002 in detail.
It does not contain a trend anal0sis of NP!s in (an,s4 although a fe/
ta(les - statistics are $ro.ided to em$hasise their im$ortance on the
$erformance - $ro5t margins of (an,

NPA MANAGEMENT
Table of Contents
Introduction
!
actors contri(uting to NP!s
............................................................................................ "
Asset classi#cation $ Pro%ision &e'uirement
................................................................... ()
Monitoring $ *ollo+ u, Measures
......................................................................................... ("
Non-Legal &emedies .Com,romise
/ettlement0 1(
/A&*AE/I Act2
1331
1!
Procedures under the 3!R!E3I
!ct ................................................................................ 14
Mo.a(le
assets ............................................................................................................
...............)(
Immo.a(le
$ro$erties ......................................................................................................
..... )5
!$$ro$riation of sale
$roceeds ...........................................................................................61
&eco%er7 8 Enforcement
Agents 65

NPA MANAGEMENT
Write o9
Polic7
6:
;id
Polic7
!(
A/Cs 8
A&Cs
!1
;oard for Industrial $ *inancial &econstruction
.;I*&0 !)
Conclusion
!!
&eferences
!4

NPA MANAGEMENT
INT&OD<CTION
on)$erforming assets - retail (an,ing are closel0 related. 9reater the demand for
credit4 more is the ris, of default4 - hence NP!s. 3o4 (efore loo,ing at NP!s in
detail4 let us see /hat constitutes retail (an,ing.
N
Retail (an,ing is :uite (road in nature ) it refers to the dealing of commercial (an,s /ith
indi.idual customers4 (oth on lia(ilities and assets sides of the (alance sheet. i;ed4
current < sa.ings accounts on the lia(ilities side= and mortgages4 loans *e.g.4 $ersonal4
housing4 auto4 and educational+ on the assets side4 are the more im$ortant of the $roducts
o2ered (0 (an,s. Related ancillar0 ser.ices include credit cards4 or de$ositor0 ser.ices.
#oda0>s retail (an,ing sector is characteri?ed (0 three (asic characteristics@
A multi$le $roducts *de$osits4 credit cards4 insurance4 in.estments and securities+=
A multi$le channels of distri(ution *call centre4 (ranch4 Internet and ,ios,+= and
A multi$le customer grou$s *consumer4 small (usiness4 and cor$orate+
Dri%ers of retail business in India
irst4 Economic $ros$erit0 and the conse:uent increase in $urchasing $o/er has
gi.en a 5lli$ to a consumer (oom. Note that during the 10 0ears after 1BB24 IndiaCs
econom0 gre/ at an a.erage rate of D.E $ercent and continues to gro/ at the
almost the same rate F not man0 countries in the /orld match this $erformance.
3econd4 changing consumer demogra$hics indicate .ast $otential for gro/th in
consum$tion (oth :ualitati.el0 and :uantitati.el0. India is one of the countries
ha.ing highest $ro$ortion *G0H+ of the $o$ulation (elo/ 68 0ears of age *0oung
$o$ulation+. #he 1RI" re$ort of the 9oldman)3achs4 /hich $redicted a (right future
for 1ra?il4 Russia4 India and "hina4 mentioned Indian demogra$hic ad.antage as an
im$ortant $ositi.e factor for India.
#hird4 technological factors $la0ed a ma%or role. "on.enience (an,ing in the form of
de(it cards4 internet and $hone)(an,ing4 an0/here and an0time (an,ing has
attracted man0 ne/ customers into the (an,ing 5eld. #echnological inno.ations
relating to increasing use of credit < de(it cards4 !#Ms4 direct de(its and $hone
(an,ing has contri(uted to the gro/th of retail (an,ing in India.
ourth4 the #reasur0 income of the (an,s4 /hich had strengthened the (ottom lines
of (an,s for the $ast fe/ 0ears4 has (een on the decline during the last t/o 0ears.
In such a scenario4 retail (usiness $ro.ides a good .ehicle of $ro5t ma;imisation.
"onsidering the fact that retail>s share in im$aired assets is far lo/er than the
o.erall (an, loans and ad.ances4 retail loans ha.e $ut com$arati.el0 less
$ro.isioning (urden on (an,s a$art from di.ersif0ing their income streams.
Management and Research [D]

NPA MANAGEMENT
ifth4 decline in interest rates ha.e also contri(uted to the gro/th of retail credit (0
generating the demand for such credit.
Credit &is=s $ NPAs>
Io/e.er4 lending is a (usiness associated /ith ris,s. Jne of the ris,s (eing ris, of
default. 1an,s (eing commercial organisations ha.e to continue lending acti.it0 to
earn $ro5ts. Pro5ta(ilit0 .er0 much de$ends on ho/ 1an,s are a(le to roll o.er their
ad.ances $ortfolio. Rolling o.er of ad.ances /ould (e $ossi(le onl0 if there is a
timel0 reco.er0 of mone0 lent. Prom$t reco.er0 of Loans and !d.ances (0 1an,s
not onl0 increases li:uidit0 and $ro5ta(ilit0 (ut it also ,ee$s funds c0cle mo.ing (0
continuous lending for the de.elo$ment of the econom0.
ollo/ing the introduction of Income Recognition and !sset "lassi5cation *IR!" norms+ and
"a$ital !de:uac0 norms4 1an,s ha.e (ecome increasingl0 sensiti.e to credit ris,s and
there is a gro/ing a/areness of the need to ,ee$ Non Performing ssets $NPs% at a lo/
le.el. Kith all 1an,s ha.ing international e;$osure re:uired to mo.e to/ards 1asel II
recommendations4 stricter ris, assessment norms and $ro.ision re:uirement leading to
im$ro.ed ca$ital ade:uac0 /ill (e the order of the da0 in the times ahead.
Kith the recent modi5cations in IR!" norms and $ro.ision re:uirement announced (0 the
Reser.e 1an, of India in Lul0 20074 it is im$lied that an asset /ill re:uire 100H $ro.ision
after 7E months from the date of the account (ecoming NP!4 irres$ecti.e of a.aila(ilit0 of
an0 securit0 or not. #he 100H $ro.ision to (e made on an account /hich does not 0ield
an0 income to the organisation is a se.ere strain on the (ottom line of the 1an,. In this
conte;t the management of NP! $ortfolio assumes $aramount im$ortance.
Management and Research [G]

NPA MANAGEMENT
W?at is an NPA @
!n asset (ecomes non)$erforming /hen it ceases to generate income to the 1an,.
#hus4 a non-performing asset (NPA) is de5ned as a credit facilit0 in res$ect of /hich the
interest and < or instalments of $rinci$al has remained Mo.erdue> for a Ms$eci5ed $eriod> of
time.
#he conce$t of Ms$eci5ed $eriod> is reduced in a $hased manner. #he shortening of the
$eriod is from 7 :uarters in 1BB6 /hen the conce$t of IR!" norms /as 5rst introduced in
India to the ,resent le%el of "3 da7s.
#hus from 61.6.2007 an ad.ance or loan *other than direct agricultural ad.ance+ shall (e
classi5ed as an NP! /here )
a. Interest and < or instalment of $rinci$al remain o.erdue for a $eriod of more than B0
da0s in res$ect of a term loan.
(. #he account remains out of order in res$ect of an o.erdraft < cash credit for more
than
B0 da0s.
c. #he (ills remain o.erdue for a $eriod of more than B0 da0s in the case of (ills
$urchased
and discounted.
d. !n0 amount to (e recei.ed remains o.erdue for a $eriod more than B0 da0s in
res$ect
of an0 other accounts.
In case of direct agricultural ad.ances4 /.e.f. 60.B.20074 a loan granted for short duration
cro$s /ill (e treated as NP!4 if the instalment of $rinci$al or interest thereon remains
o.erdue for 2 cro$ seasons. In the case of long duration cro$s4 the loan /ill (e treated as
NP! if the instalment of $rinci$al or interest thereon remains o.erdue for 1 cro$ season.
EA,lanation of some terms used in NPA management
/ecurit7 Interest>
3ecurit0 Interest means right4 title and interest of an0 ,ind /hatsoe.er u$on $ro$ert04
created in fa.our of an0 secured creditor and includes mortgage4 charge4 h0$othecation
and assignment
Wilful defaulters>
N! Kilful Default' /ould (e deemed to ha.e occurred if an0 of the follo/ing e.ents is
noted @)
#he unit has defaulted in meeting its $a0ment < re$a0ment o(ligations to the lender
e.en /hen it has the ca$acit0 to honour the said o(ligations.
Management and Research [E]

NPA MANAGEMENT
#he unit has defaulted in meeting its $a0ment < re$a0ment o(ligations to the lender
and has not utilised the 5nance from the lender for the s$eci5c $ur$oses for /hich
5nance /as a.ailed of (ut has di.erted the funds for other $ur$oses.
#he unit has defaulted in meeting its $a0ment<re$a0ment o(ligations to the lender
and has si$honed o2 the funds so that the funds ha.e not (een utilised for the
s$eci5c $ur$ose for /hich 5nance /as a.ailed of4 nor are the funds a.aila(le /ith
the unit in the form of other assets.'
Di%ersion of funds>
Di.ersion of funds4 /ould (e construed to include an0 one of the undernoted occurrences@
Otilisation of short)term /or,ing ca$ital funds for long)term $ur$oses not in
conformit0 /ith the terms of sanction=
De$lo0ing (orro/ed funds for $ur$oses < acti.ities or creation of assets other than
those for /hich the loan /as sanctioned=
#ransferring funds to the su(sidiaries < 9rou$ com$anies or other cor$orates (0
/hate.er modalities=
Routing of funds through an0 (an, other than the lender (an, or mem(ers of
consortium /ithout $rior $ermission of the lender=
In.estment in other com$anies (0 /a0 of ac:uiring e:uities < de(t instruments
/ithout a$$ro.al of lenders=
3hortfall in de$lo0ment of funds .is)P).is the amounts dis(ursed < dra/n and the
di2erence not (eing accounted for.
/i,?oning of funds>
3i$honing of funds4 should (e construed to occur if an0 funds (orro/ed from (an,s < Is
are utilised for $ur$oses un)related to the o$erations of the (orro/er4 to the detriment of
the 5nancial health of the entit0 or of the lender. #he decision as to /hether a $articular
instance amounts to si$honing of funds /ould ha.e to (e a %udgement of the lenders
(ased on o(%ecti.e facts and circumstances of the case.
Management and Research [B]

NPA MANAGEMENT
*actors contributing to NPAs>
!ccording to a recent stud0 conducted (0 the R1I4 the underl0ing reasons for NP!s in India
can (e classi5ed into t/o heads4 namel0@
1. Internal actors
2. E;ternal actors
Internal *actors>
a. Di.ersion of funds for e;$ansion<di.ersi5cation<modernisation or for ta,ing u$ ne/
$ro%ects
(. Di.ersion of funds for assisting or $romoting associate concerns
c. #ime or cost o.errun during the $ro%ect im$lementation stage
d. 1usiness failures due to $roduct failure4 failure in mar,eting4 etc
e. IneQcienc0 in management
f. 3lac,ness in credit management - monitoring
g. Ina$$ro$riate technolog0 or $ro(lems related to modern technolog0
EAternal *actors>
a. Recession in the econom0 as a /hole
(. In$ut or $o/er shortage
c. Price escalation of in$uts
d. E;change rate Ructuation
e. !ccidents - natural calamities

NPA MANAGEMENT
f. "hanges in go.ernment $olicies relating to e;cise - im$ort duties4 $ollution control
orders4 etc
g. 9o.ernment loan /ai.er scheme
Ot?er *actors>
!$art from the a(o.e factors4 there are certain other factors /hich are res$onsi(le for
standard assets (ecoming NP!s. #he0 are @
a. Li(eralisation of the econom0 - the conse:uent $ressures from li(eralisation li,e
se.ere com$etition4 reduction of tari2s4 remo.al of restrictions
(. Poor monitoring of credits - the failure to recognise earl0 /arning signals sho/n (0
standard assets
c. Promoters> o.er)o$timism in setting u$ large $ro%ects
d. 3udden crashing of ca$ital mar,ets - the failure to raise ade:uate funds
e. 9ranting of loans to certain sectors on the (asis of the 9o.ernment>s directi.es
rather than commercial im$erati.es
f. Mismatch of funding i.e. using loans granted for short term for long term
transactions
g. Iigh le.eraging - high cost of (orro/ing
h. "ommitment of /ilful defaults sensing that the legal recourse a.aila(le to collect
de(ts is .er0 slo/
Earl7 Warning /ignals
#he Earl0 Karning 3ignals *EK3+ are those that clearl0 indicate or sho/ some signs of
credit deterioration in the loan account. #he0 indicate the $otential $ro(lems in.ol.ed
in the accounts so that remedial action can (e initiated immediatel0. In fact most (an,s
ha.e Earl0 Karning 30stems for identi5cation of $otential NP!s.
Classi#cation of Earl7 Warning /ignals

NPA MANAGEMENT
#he0 can (roadl0 (e classi5ed into 8 categories@
1. inancial signals
2. J$erational signals
6. 1an,ing signals
7. Managerial signals
8. E;ternal signals
*inancial Warning /ignals
a. Default in re$a0ment
(. "ontinuous irregularit0 in the account
c. De.elo$ment of L<" or in.ocation of guarantees
d. Deterioration in /or,ing ca$ital $osition or in li:uidit0
e. Declining sales com$ared to $recious $eriod
f. 3u(stantial increase in long)term de(ts
g. Rising sales (ut falling $ro5ts
h. Incurring o$erating losses or net losses
i. Rising le.el of (ad de(t losses
O,erational Warning /ignals
a. Onderutilisation of $lant ca$acit0
(. Non)$a0ment of electricit0 (ills4 /ages4 etc
c. re:uent la(our $ro(lems
d. Poor di.ersi5cation - fre:uent changes in $lan for e;$ansion < di.ersi5cation <
modernisation
e. E.idence of o.erstoc,ing - aged in.entor0

NPA MANAGEMENT
f. Loss of im$ortant customers
Managerial Warning /ignals
a. Di.ersion of funds - $oor 5nancial controls
(. Lac, of co)o$eration from ,e0 $ersonnel
c. "hange in management or o/nershi$ $attern or ,e0 $ersonnel
d. Onderta,ing of undue ris,s
e. udging of 5nancial statements
;an=ing signals
a. re:uent re:uest for further loans
(. Dela0s in ser.icing of interest
c. Reduction of o$erations in the account or reduction in (an, (alances
d. J$ening of accounts /ith other (an,s
e. Dishonouring of che:ues or return of (ills sent for collection
f. Not routing sales transactions through the account
g. Dela0s in su(mitting stoc, statements - other data or non)su(mission of $eriodical
statements
h. re:uent e;cesses in the account
EAternal Warning /ignals
a. Economic recession
(. Introduction of ne/ technolog0
c. "hanges in 9o.ernment $olicies
d. Emergence of ne/ com$etition
e. Natural calamities

NPA MANAGEMENT
f. Kea,ening of industr0 characteristics

NPA MANAGEMENT
!33E# "L!33II"!#IJN !ND PRJSI3IJN
RETOIREMEN#
/tandard Assets>
#he standard assets consist of assets /hich are totall0 regular4 safe and conducted as $er
norms of sanction. Io/e.er4 during the o$erations of such accounts4 some of them4 at
times4 sho/ signs of de.iations4 sic,ness4 out of order $osition /herein the0 (ecame
irregular. Khen such irregularities are noticed4 the0 are classi5ed as MKatch "ategor0'
assets /ith "ode No. 12 (ut continues to (e a $art of &3tandard !sset'. #hese accounts
need higher le.el of monitoring and ha.e to (e regularised (efore these irregularities
continue for more than B0 da0s. Pro.ision re:uirement for a standard asset *including
Katch "ategor0 asset+ is gi.en (elo/@
0.28H of the outstanding dues in all 3tandard !ssets under 3ME and !gricultural
sector
1.00H of the outstanding dues in all 3tandard !ssets of the !<c>s to "a$ital
Mar,et e;$osure4 $ersonal loan4 commercial real estate and residential
housing (e0ond Rs.20<) la,h.
0.70H Jf the outstanding dues in all 3tandard !ssets (elonging to all other
categories.
Categories of NPAs
1an,s are re:uired to classif0 NP!s further into follo/ing categories4 (ased on the $eriod
for /hich asset has remained non)$erforming and realisa(ilit0 of dues.
3u()standard !sset
Dou(tful !sset
Loss !sset
/ubstandard Assets>
Kith e2ect from 61st March 20084 su(standard asset is one /hich has remained NP! for a
$eriod less than or e:ual to 12 months. Its !sset "ode is 20. #he $ro.ision re:uirement in
su(standard asset /as earlier Rat 10H of the outstanding dues4 irres$ecti.e of the
categor0 of the ad.ance *secured or clean+.
No/ R1I has remo.ed the "!P on the unsecured e;$osures and indi.idual 1an, 1oards
/ere gi.en the freedom to formulate their o/n $olic0 guidelines for $rudential norms on
unsecured e;$osures. 3imultaneous /ith this li(eralisation4 R1I has made norms of
$ro.ision re:uirement on unsecured e;$osure of 1an,s more stringent. Onsecured
e;$osure is de5ned as an e;$osure /here the realisa(le .alue of securit0 as sti$ulated

NPA MANAGEMENT
and ascertained (0 the .aluation is not more than 10H Ua( initio>. #hat means all clean <
unsecured ad.ances /hen the0 (ecome NP! as su(standard asset4 /ill no/ */.e.f.
61.6.2008+ re:uire a $ro.ision at 20H of the outstanding
Management and Research [1D]

NPA MANAGEMENT
(alances. !s against this4 the normal secured ad.ances4 /hen mo.ing to NP! as
su(standard asset /ill re:uire 10H of the outstanding (alance as $ro.ision *no change
from e;isting s0stem+. #hus from 61.6.2008 on/ards the su(standard asset /ill ha.e 2
segments /ith di2erent $ro.ision re:uirement as (elo/ @)
*a+ 3u(standard F secured assets F "ode 21 F $ro.ision at 20H of outstanding dues
*(+ 3u(standard F unsecured assets F "ode 22 F $ro.ision at 20H of outstanding dues
Doubtful Assets>
It consists of 6 stages ) Dou(tful I4 Dou(tful II and Dou(tful III. #he $ro.ision re:uirement in
each stage of Dou(tful asset /ill (e as under@
Doubtful I .Code )(0 ) !ssets remaining for a $eriod of 12 months in Dou(tful categor0 F
$ro.ision re:uirement shall (e 20H of RS3 V 100H of shortfall in securit0 *i.e. NP!s o.er
12 months u$to 27 months+
Doubtful II .Code )10 - !ssets remaining for a $eriod of further 27 months in Dou(tful
categor0 F $ro.ision re:uirement shall (e 60H of RS3 V 100H of shortfall in securit0 *i.e.
NP!s o.er 27 months u$to 7E months+
Bo+e%er2 e9ecti%e Cune 133:2 t?e ,ro%ision re'uirement as ,er ;OI ,olic7 s?all
be (33D for ECode )(F $ ECode )1F assets also
Doubtful III .Code ))0 - !ssets remaining for more than 6 0ears in Dou(tful categor0.
R1I has no/ decided that all ad.ances classi5ed as dou(tful for more than 6 0ears .ie
entering8entered to Doubtful III categor70 on or after (st A,ril 1336 s?all re'uire
a ,ro%ision of (33D for the secured $ortion also /.e.f. 0ear ending 61.6.2008. In other
/ords all accounts migrating from Dou(tful II to Dou(tful III on or after 1.7.2007 shall
re:uire 100H $ro.ision as on 61.6.2008 and thereafter *irres$ecti.e of RS3+.
!s an intermediate measure for smooth transition4 R1I had im$lemented a graded s0stem
of $ro.ision re:uirement at D0H and G8H of the RS3 V 100H of shortfall for the 0ear
ending 61.06.08 and 61.06.0D for accounts /hich /ere classi5ed as Dou(tful III categor0
as on 61.06.07 *i.e. 3toc, Dou(tful III !<cs+. Io/e.er4 these accounts also /ill re:uire
100H $ro.ision from 61.06.0G on/ards.
As ,er t?e eAisting ,ro%isioning norms2 all accounts entering into or alread7
classi#ed as Doubtful III +ill uniforml7 re'uire (33D ,ro%ision as on )()34 and
t?ereafter
Loss Assets G Code 63
! loss asset is one /here loss has (een identi5ed (0 1an, or internal or e;ternal creditors
or R1I ins$ectors (ut the amount has not (een full0 /ritten o2. 3uch an asset is
considered uncollecti(le and of such little .alue that its continuance is not /arranted4
e.en though there ma0 (e some small *less than 10H+ sal.age reco.er0 .alue. #he
Management and Research [1G]

NPA MANAGEMENT
$ro.ision re:uirement is 100H of net outstanding dues. #hese loss assets should (e
graduall0 /ritten o2 from the (oo,s.
Management and Research [1E]

NPA MANAGEMENT
Management and Research [1B]

NPA MANAGEMENT


NPA MANAGEMENT
/ome facts about NPAs >
rom 1BEB)B84 more than three :uarters of mem(ers of IM e;$erienced serious -
costl0 (an,ing crisis *around D6 countries su2ered s0stemic (an,ing crisis in the
1BB0s+
Direct cost of restructuring the 5nancial s0stem can (e t0$icall0 .er0 high @
!!D of 9DP in !rgentina4 61H in #hailand4 )!D in Worea - (3D in #ur,e0
!s at end)March 200G4 E2 out of E7 (an,s o$erating in India maintained "R!R at or
a(o.e BH *corres$onding 5gure for 1BB8)BD /as 87 out of B2 (an,s+
!s on March 614 200G= NP!s stood at@
Priorit0 3ector Non)$riorit0 3ector
Public /ector ;an=s
.P/;s0
80.11H 7B.EBH
Pri%ate /ector ;an=s 2B.22H G0.GEH

NPA MANAGEMENT
MJNI#JRIN9 !ND JLLJK OP ME!3ORE3
8it$ t$e I"%ome 7e%o("itio" #"d A!!et C'#!!ifi%#tio" Norm! be%omi"( !tri%ter. Br#"%$e! #re re-uired
to be more #'ert #"d &ro#%ti,e i" mo"itori"( t$e #%%ou"t!. For t$i! &ur&o!e. mo"t$' i"tere!t #&&'i%#tio"
$#! be%ome # u!efu' too' to t#%5'e &ote"ti#' de'i"-ue"%ie! or def#u't! i" !t#"d#rd #%%ou"t!. To ret#i"
t$e #!!et -u#'it. Br#"%$e! !$ou'd &rom&t' #%t #"d 0-
7e%o,er t$e o,erdue! or #t 'e#!t t$e %riti%#' #mou"t t$rou($ #%ti,e fo''o4 u& 4it$ borro4er!9
Put t$e #%%ou"t! u"der $o'di"( o" o&er#tio"! i" %#!e of tem&or#r %#!$ f'o4 mi!m#t%$e!9
7e!%$edu'e t$e re&#me"t term! #! &er e6&e%ted %#!$ f'o4!9
7e!tru%ture t$e due! i" 5ee&i"( 4it$ t$e e6&e%ted %#!$ f'o4! #"d (#&! i" %#!$ f'o4!. if #" #!
&er (uide'i"e! (i,e" i" t$e re!tru%turi"( &o'i%.
!n0 one or more of the a(o.e actions should (e ta,en (efore the account (ecomes NP!
Measures for follow up of Watch Category Accounts / NPA Accounts
T$e ,#riou! me#"! of mo"itori"(3re!o',i"( NPA! (e"er#'' #,#i'#b'e to t$e B#"5! #re 'i!ted be'o4 0-
A) B,!r, %(, #--4'% 7,-3*'5 NPA (8#%-( C#%,5r" A9-)
2. C'o!e mo"itori"( for %om&'i#"%e of !#"%tio" term! to m#i"t#i" #!!et -u#'it.

2. 7emi"der! to be !e"t &rom&t' 4$e"e,er irre(u'#ritie! #re ob!er,ed.
1. To re%o,er o,erdue! -ui%5' to e"!ure #%%ou"t doe! "ot !'i& to NPA %#te(or
:. Periodi% i"!&e%tio" of t$e u"it #"d %$#r(ed #!!et! #'o"( 4it$ #"#'!i! of fi"#"%i#' d#t#.
;. To re!tru%ture t$e due! before #%%ou"t! be%ome NPA!. 7emedi#' #%tio" i"%'ude!
e"$#"%eme"t of mor#torium &eriod. fu"di"( of i"tere!t. deferme"t of i"!t#''me"t!. Su%$
re!%$edu'i"( 3re!tru%turi"(3 re$#bi'it#tio" to be do"e u"der B#"5<! 7e!tru%turi"( Po'i%
3 BIF7 #&&ro,ed !%$eme 3 CD7 Me%$#"i!m.


NPA MANAGEMENT
B) A!%,r %(, #--4'% 7,-3*'5 NPA = fo''o4i"( me#!ure! to be i"iti#ted for re%o,eri"( B#"5<!
due!.
2. A&&ro&ri#tio" of 'i-uid !e%uritie! )TD7. NSC. !$#re!. m#r(i" mo"e et%.* #"d &'ed(ed
(ood!. to redu%e out!t#"di"( b#'#"%e
2. Di!&o!#' of ot$er !e%uritie!. 4it$ t$e %o-o&er#tio" of borro4er!.
1. 7e!tru%turi"( u"der B#"5<! &o'i%. CD7. BIF7 et%.. for ,i#b'e u"it!
:. Com&romi!e !ett'eme"t of due! t$rou($ "e(oti#tio" u"der B#"5<! 7e%o,er Po'i% #"d
!&e%i#' 7BI >TS S%$eme! )i" for%e from time to time*
;. Forum of /o5 Ad#'#t #"d 7e%o,er C#m&!
?. 7e%#''i"( t$e #d,#"%e
7. I"iti#ti"( #%tio" u"der S7FAESI A%t #(#i"!t %$#r(ed !e%uritie!
@. Fi'i"( !uit i" Court 3 D7T )Debt 7e%o,er Tribu"#'* = E6e%utio" of de%ree
9. ECGC %'#im. if #". to be 'od(ed #fter re%#''i"( t$e #d,#"%e. re&orti"( t$e def#u't #"d
fo''o4 u& for e#r' !ett'eme"t of t$e %'#im
20. S#'e of fi"#"%i#' #!!et! to A7C!
22. S#'e of fi"#"%i#' #!!et! to B#"5! 3 FI! 3 NBFC!
22. /#!t'. #fter #'' t$e %$#"%e! of re%o,er of due! #re e6$#u!ted. 4e m# re!ort to 4riti"(
off of t$e b#'#"%e due!
A'' t$e!e me#"! $#,e to be effe%ti,e' &ur!ued for re!o'utio" of NPA!.
A::*'%3,'% ! N3*',, D*r,-%r0
!s an e2ecti.e measure for closel0 monitoring the NP! accounts /here 1an, of India>s
e;$osure is su(stantial or /here the0 are the sole (an,ers *or in consortium /here the0
ha.e su(stantial share+4 the0 ma0 a$$oint Nominee Director in consultation /ith the
(orro/er com$an0. Recommendations for a$$ointing Nominee Director shall (e su(mitted
(0 the Xonal JQce for a$$ro.al at Iead JQce. ! committee of 6 9eneral Managers shall
$rocess the re:uirement and after their clearance4 the same shall (e su(mitted to
E;ecuti.e Director and "hairman - Managing Director for a$$ro.al. #he Nominee Director
shall (e an oQcial of the 1an,4 not (elo/ the ran, of !ssistant 9eneral Manager4 /ho is
con.ersant /ith the a2airs of the com$an0. #he a$$ointments *and also changes due to
transfer<retirement of oQcials+ shall (e su(%ect to annual re.ie/.

NPA MANAGEMENT
NJN)LE9!L REMEDIE3
*COMP&OMI/E /ETTLEMENT/0
A %om&romi!e i! # !ett'eme"t of di!&ute! re#%$ed b mutu#' %o"!e"t. It i! # "e(oti#ted !ett'eme"t 4it$
!#%rifi%e %om&o"e"t o" #'' t$e &#rtie! to t$e di!&ute. It i! # "o" 'e(#' remed for redu%tio" of NPA! of
t$e B#"5. Ne(oti#ted %om&romi!e !ett'eme"t! !$ou'd be m#de to m#6imi!e t$e %om&romi!e #mou"t!.
S&e%i#' o"e-time !ett'eme"t !%$eme! of 7BI #""ou"%ed from time to time 'i5e 7BI >TS S%$eme 2000.
S%$eme for !m#'' borro4er!. S%$eme for !m#'' #"d m#r(i"#' f#rmer! #"d 7BI >TS S%$eme of 2001.
7BI >TS for !m#'' #"d m#r(i"#' f#rmer!. 7BI >TS 200; for SME et%. #re "ot %o,ered b t$e fo''o4i"(
(uide'i"e!. Se&#r#te (uide'i"e! 4i'' be i!!ued from time to time for !u%$ !%$eme! #! &er t$e
i"!tru%tio"! of t$e 7BI #"d de'e(#tio" of &o4er! for #&&ro,#' of !u%$ !%$eme! 4i'' be #d,i!ed
!e&#r#te'.
T$e fo''o4i"( &ro%edure! #"d !!tem! #re #&&'i%#b'e for %om&romi!e !ett'eme"t #! &er B#"5<! o4"
re%o,er &o'i%. Pre!e"t' t$ere #re fo''o4i"( 2 differe"t !%$eme! of >TS i" B>I.
AA 7e(u'#r %om&romi!e !ett'eme"t
BA S&e%i#' >TS for !m#'' NPA! 3 4ritte" off #%%ou"t! 4it$ out!t#"di"( b#'#"%e! u&to 7!.;00003-
A; R,542#r -3:r3*&, &,%%2,3,'%&
N,5%*#%*' Pr-,&&
T$e B#"5 !$ou'd e"de#,our to m#6imi!e re%o,erie! 3 %om&romi!e #mou"t! t#5i"( i"to #%%ou"t
,#riou! &#r#meter! #! be'o40
) #(e of t$e NPA.
) !tre"(t$ of do%ume"t#tio".
) #(e #"d !t#(e of &ro%eedi"(! i" t$e !uit.
) %o"ditio" #"d #,#i'#bi'it of %$#r(ed #"d u"%$#r(ed #!!et! of t$e borro4er3 (u#r#"tor.
) t$e &o!!ibi'it of deterior#tio" #"d #'ie"#tio" of #!!et! 'e#di"( to t$re#t to !e%urit3re%o,er.
) %#&#%it for "e(oti#tio" b t$e B#"5 #"d t$e borro4er.
) Po!itio" of (rou& #%%ou"t! #"d &re!e"t !t#tu! of #%ti,it of t$e borro4er!
I" t$e &ro%e!! of "e(oti#tio". !#%rifi%e of ,#riou! %om&o"e"t! of t$e due! #! be'o4 i" t$e order of
de!ir#bi'it 4ou'd be %o"!idered =
) &e"#' i"tere!t
) i"%ide"t#' e6&e"!e! i"%'udi"( i"!&e%tio"3i"!ur#"%e %$#r(e!.
) ECGC3DICGC (u#r#"tee fee!.
) 'e(#' e6&e"!e! i"%urred #"d to be i"%urred.

NPA MANAGEMENT
) %om&ou"di"( effe%t of i"tere!t.
) u"%$#r(ed i"tere!t
) Ledger &rite off is to 'e considered onl( &hen it is unavoida'le.

T$e fo''o4i"( f#%tor! 4ou'd #'!o be %o"!idered 4$i'e "e(oti#ti"( 0
) Time ,#'ue of mo"e #"d &rob#b'e future re%o,erie! %om&#red 4it$ t$e offer #mou"t.
) 7e#'i!#b'e ,#'ue of !e%urit e,#'u#ted o" # di!tre!! !#'e b#!i!.
) me#"! of borro4er!3(u#r#"tor! ot$er t$#" t$e !e%urit %$#r(ed i" t$e #%%ou"t or #tt#%$ed i"
e6e%utio" &ro%eedi"(! #"d t$eir %urre"t i"%ome if t$e #re e"(#(ed i" (#i"fu' #%ti,itie!.
) t$e #mou"t re&##b'e to DICGC3ECGC o" !ett'eme"t.
) if t$ere #re %redit b#'#"%e! i" t$e "#me of t$e borro4er i" m#r(i" or ot$er de&o!it #%%ou"t!.
) %om&o"e"t of #mou"t out!t#"di"( #"d u"%$#r(ed i"tere!t i" t$e tot#' due! )#(e of NPA*
) !t#(e of re%o,er #%tio" !u%$ #! re%#''. fi'i"( of !uit. de%ree. et%.
) !tre"(t$ #"d 4e#5"e!!e! of b#"5<! %#!e i" re!&e%t of do%ume"t#tio". re#'i!#tio" of !e%urit.
et%.
) %o!t of m#i"t#i"i"( t$e !uit. m#i"t#i"i"( t$e !e%urit )(odo4" %$#r(e!. i"!&e%tio" e6&e"!e!.
re%ei,er due!. i"!ur#"%e. !e%urit 4#(e!. et%.*
) im&#%t of #%%e&ti"( t$e %om&romi!e &ro&o!#' o" PB/ A3% )b 4# of 4rite b#%5 of &ro,i!io"!
#"d re%o,er of u"%$#r(ed i"tere!t*.
Com&romi!e! m# be "e(oti#ted 4it$ =
&ri"%i&#' borro4er
(u#r#"tor! eit$er for &#rti#' &#me"t or fu'' &#me"t
&#re"t %om&#"
ot$er i"tere!ted &#rtie! 'i5e dr#4ee! of bi''!. 'e(#' $eir!. et%.
E2*5*7*2*%"
#* T$e e'i(ibi'it %riteri# for e"teri"( i"to %om&romi!e! #re =
i. T$e #%%ou"t !$ou'd be %'#!!ified #! "o"-&erformi"( #!!et. A%%ou"t! 4$i%$ $#,e be%ome "o"-
&erformi"( #!!et!. duri"( t$e %our!e of t$e e#r. for 4$i%$ &ro,i!io" i! to be m#de #t # future
d#te #re #'!o e'i(ib'e
ii. T$e def#u't !$ou'd $#,e o%%urred due to re#!o"! beo"d t$e %o"tro' of t$e borro4er
iii. Effort! for u&(r#d#tio" eit$er b re!tru%turi"( or re$#bi'it#tio" $#,e eit$er f#i'ed #"d3 or m# "ot
ie'd de!ired re!u't!.
i,. T$e !e%uritie!. i"%ome3 4ort$ of t$e borro4er3 (u#r#"tor! i! "ot !uffi%ie"t to e"!ure fu'' re%o,er
of t$e due!.
,. A" ot$er re#!o" i" 4$i%$ %o"ti"u#tio" of re'#tio"!$i& 4it$ t$e borro4er i! %o"!idered "ot i" t$e
i"tere!t of t$e B#"5.
,i. A'' !uit fi'ed3de%reed A3%<!. A3%<! u"der BIF73AAIF7 refere"%e #! 4e'' #! A3%<! %o"!idered u"der
CD7 #"d ot$er re!tru%turi"( !%$eme! #re #'!o e'i(ib'e to be %o"!idered for >TS u"der B#"5<!
7e%o,er Po'i%.

NPA MANAGEMENT
7) I',2*5*72, C#&,&
T$e fo''o4i"( %#!e! #re "ot e'i(ib'e *' %(, 'r3#2 -4r&, #'6 #r, '% ,'%,r%#*',6 7" %(, r,542#r
6,2,5#%,,& 7,2< %(, 2,),2 ! G,',r#2 M#'#5,r, HO, ARD
) 8i'fu' def#u'ter!
) C#!e! of m#'fe#!#"%e3 mi!fe#!#"%e
) Fr#ud3 %$e#ti"(
1efore identif0ing an a$$licant as /ilful defaulter 1ranch should ,ee$ suQcient data <
records to $ro.e and esta(lish that the (orro/er is a /ilful defaulter. In the a(sence of
such $roof the (orro/er should (e gi.en the (ene5t of the $olic0. E.en in case of /ilful
default or fraud accounts4 the com$romise o2ers4 if .alua(le in mone0 terms4 shall (e
referred to Iead JQce through Xonal JQce.
C3:r3*&, &,%%2,3,'% #'6 &#-r*!*-, 0
T$e #ut$orit for #&&ro,#' i! determi"ed b t$e C&#-r*!*-,D &ro&o!ed u"der # !ett'eme"t. The
sacrifice is the difference between notional amount due calculated as below
and the OTS amount offered For t$e!e &ur&o!e! t$e Notio"#' Amou"t due #"d !#%rifi%e i!
#rri,ed #t #! u"der =
a0 N%*'#2 #34'% 64, 0 Co"!ideri"( t$e #(e of NPA. "#ture of #!!et %'#!!ifi%#tio" #"d t$e
(rou"d re#'itie!. t$e B#"5 $#! "o4 #do&ted # t4o 4# !!tem of #rri,i"( #t t$e "otio"#' due! #!
be'o4 0-
)i* I" #%%ou"t! 4$ere t$e #!!et %'#!!ifi%#tio" i! Sub!t#"d#rd or Doubtfu' for %#'%u'#ti"( t$e
"otio"#' due!. &*3:2, *'%,r,&% = .> ),r B#'+ r#%, )&re!e"t' ?E F 2E G @E*
i! #dded to t$e 'ed(er out!t#"di"( b#'#"%e #! o" d#te of NPA3 d#te of i"tere!t %e#!i"(.
Sim&'e i"tere!t #t t$e #bo,e me"tio"ed r#te !$#'' be %#'%u'#ted from t$e d#te of %e#!i"(
i"tere!t ti'' t$e '#!t d#te of &re,iou! mo"t$ of t$e !ubmi!!io" of t$e %om&romi!e
&ro&o!#'. H#'ue-d#ti"( of %redit! 3 debit! !$#'' be do"e 4$i'e %#'%u'#ti"( t$e i"tere!t
from d#te of NPA 3 i"tere!t %e#!i"(.
)ii* I" #%%ou"t! 4$ere t$e #!!et %'#!!ifi%#tio" i! C'o!! #!!etD or t$e 'ed(er b#'#"%e! i!
#'re#d 4ritte" off NO *'%,r,&% &(#22 7, 2#6,6 to t$e 'ed(er b#'#"%e! from t$e d#te
of #%%ou"t %'#!!ified #! NPA.
b0 /acri#ce @ !mount (0 /hich the Notional !mount due e;ceeds the $ro$osed
com$romise amount constitutes the sacri5ce. 3uch sacri5ce determines the
delegated authorit0 /ho should a$$ro.e the com$romise.

NPA MANAGEMENT
P#"3,'% ?
#* T$e #mou"t of !ett'eme"t !$ou'd &refer#b' be &#id i" o"e 'um&!um 4it$i" t$ree mo"t$! from
t$e d#te of %o",ei"( t$e #&&ro,#'. I"tere!t 4i'' "ot be %$#r(ed if t$e &#me"t i! m#de 4it$i"
t$ree mo"t$! of %o",ei"( t$e #&&ro,#'.
b* I" %#!e 4$ere t$e borro4er! #re u"#b'e to &# t$e e"tire #mou"t i" o"e 'um&!um. t$e fo''o4i"(
&ro%edure m# be #do&ted -
Norm#'' mi"imum u&fro"t3 do4" &#me"t of ;E of t$e %om&romi!e offer &ro&o!ed be
de&o!ited #! to5e" &#me"t i" # CNo /ie"D #%%ou"t. I&fro"t mu!t be i"!i!ted u&o"9
$o4e,er. it !$#'' "ot %ome i" t$e 4# of e"tert#i"i"( >TS &ro&o!#' if ot$er4i!e
#%%e&t#b'e. I" %#!e 4$ere t$e %om&romi!e #mou"t i! e6&e%ted to be &#id b t$e !#'e of
!e%uritie! %$#r(ed to t$e B#"5. t$e do4" &#me"t m# "ot be i"!i!ted u&o".
%* 7e&#me"t of %om&romi!e to be fi6ed !u%$ t$#t mi"imum 2;E i! &#id 4it$i" 1 mo"t$!.
d* B#'#"%e #mou"t of 7;E !$ou'd be re%o,ered i" e-u#' mo"t$' 3 -u#rter' i"!t#''me"t! 4it$i" #
&eriod of furt$er 9 mo"t$! m#6imum to(et$er 4it$ i"tere!t o" redu%i"( b#'#"%e #t t$e e6i!ti"(
P/7 from t$e d#te of %o",ei"( of #&&ro,#' u&to t$e d#te of fi"#' &#me"t. T$e de'e(#tee! !$#''
#&&ro,e re&#me"t &eriod #! &er t$e det#i'! (i,e".
Delegation
#he delegation for a$$ro.al of sacri5ce in the com$romise $ro$osals is as under @)
*Rs. In la,hs+
Managing "ommittee ull $o/ers
"hairman and Managing Director
E;ecuti.e Director
9eneral Manager4 I.J.4 !RD
9eneral Manager *Xonal Manager+
D0.9eneral Manager< 3cale SI *and D9M4
I.J.4!RD+
!sst. 9eneral Manager<3cale S
"hief Manager 3cale IS
Manager *large 1ranch+ 3cale III
80.00
6G.80
60.00
28.00
20.00
10.00
2.80
1.00

NPA MANAGEMENT
/A&*AE/I Act
(T(, S,-4r*%*&#%*' & R,-'&%r4-%*' ! F*'#'-*#2 A&&,%& #'6 E'!r-,3,'%
! S,-4r*%" I'%,r,&% A-%, .00.)
T$e Se%uriti!#tio" #"d 7e%o"!tru%tio" of Fi"#"%i#' A!!et! #"d E"for%eme"t of Se%urit I"tere!t A%t.
2002 i! #" effe%ti,e too' i" t$e $#"d! of t$e B#"5 to e"for%e t$e !e%urit i"tere!t! #"d re%o,er t$e due!
t$ereb redu%i"( NPA!. T$e A%t $#! t$ree !e(me"t! =
Se%uriti!#tio" #"d A!!et 7e%o"!tru%tio" Com&#"ie!
Ce"tr#' 7e(i!tr
E"for%eme"t of Se%urit I"tere!t
T$e SA7FAESI A%t e"#b'e! t$e B#"5 4$ere,er t$e B#"5 i! # !e%ured %reditor to e"for%e
!e%urit i"tere!t for re%o,er of it! due! 4it$out t$e i"ter,e"tio" of t$e Court or Debt 7e%o,er
Tribu"#' &ro,ided t$#t !e%ured i"tere!t $#! bee" &ro&er' %re#ted i" f#,our of t$e B#"5.
Criteria for in%o=ing ,ro%isions of t?e /A&*AE/I Act>
1efore enforcing securit0 interest4 (ranches should ensure that the (orro/al accounts
com$l0 /ith the follo/ing criteria F
#he contractual dues in the account should (e more than Rs.1.00 la,h.
#he default must ha.e occurred i.e. the account should ha.e (ecome NP! as $er
R1I norms.
#he securit0 charged to the 1an, must (e s$eci5c4 clear and a.aila(le to the 1an,.
It must (e dul0 and e2ecti.el0 charged to the 1an, and therefore4 enforcea(le if the
(orro/er fails to $a0 in res$onse to the Notice.
#he securit0 documents in the ad.ance account should (e in full force on the date
of ser.ing the D0 da0s notice. !s an a(undant caution4 it should (e ensured that
the0 are in force e.en at the time of the !ction that /ill follo/ for enforcement of
securit0 i.e. at least u$to one 0ear from the date of ser.ing the notice.
#he securit0 documents should (e dul0 5lled in and no column should (e ,e$t (lan,.
Either 1an, of India must (e the sole 1an,er to the (orro/er i.e. 100H lending is
done (0 us or in case of %oint lending4 at least lenders re$resenting G8H of the
contractual amount due and out)standing agree to ta,e !ction.
In case of Multi$le 1an,ing4 if the securit0 is e;clusi.el0 charged4 the 1an, can
$roceed as though it is the sole 1an,er.

NPA MANAGEMENT
EAem,tions >
#he follo/ing are e;em$ted from the $ur.ie/ of the !ct F
!ccounts /here the contractual dues are less than Rs.1.00 la,h.
Khen the securit0 interest is created on agricultural land. Io/e.er4 other
agricultural related assets li,e tractor4 im$lements etc. can (e enforced4 if charged
as securit0 to 1an,>s ad.ance.
Khere the contractual dues remaining un$aid is less than 20H of the $rinci$al i.e.
total amount dis(ursed and interest.
!ssets under $ledge4 lien < assets 5nanced under lease or hire $urchase are not
co.ered.
Due Diligence /tud7@
1efore in.o,ing the $ro.isions of the 3!R!E3I !ct4 a due diligence stud0 should (e
conducted in res$ect of the secured assets to (e ta,en into $ossession co.ering nature4
.alue of such assets4 $ro(a(ilit0 of 5nding a (u0er in the shortest $eriod *it /ill (e (etter if
a (u0er is identi5ed (efore underta,ing the e;ercise+ e;$enses to (e incurred in
connection /ith safe),ee$ing < storage4 a$$ointment of securit0 guards4 estimated
realisa(le .alue of the assets in case of sale etc. 1ranches should ,ee$ the a(o.e in mind
(efore initiating enforcement !ction.
P!OC"#$!" %O! P!OC""#&N' $N#"! T(" SA!%A"S& ACT)
I Identi#cation of accounts $ Obtention of A,,ro%al for Action
#he entire NP! $ortfolio of the 1ranch should (e gone through and accounts
ful5lling the eligi(ilit0 conditions as gi.en a(o.e should (e identi5ed.
Jut of those identi5ed accounts such accounts should (e short)listed in /hich
charged securit0 can (e ta,en into $ossession for sale<lease for reco.er0 of 1an,>s
dues.
#he 1ranch must $ut u$ the $ro$osal (efore the "om$etent !uthorit0 for a$$ro.al
for !ction under the !ct as $er the $rescri(ed format.
Jn o(tention of a$$ro.al4 D0 da0s notice*s+ should (e sent under the signature of
the !uthorised JQcer.

NPA MANAGEMENT
#here is no /aiting $eriod for issuing notices under the !ct. !s soon as the account
(ecomes NP!4 notices under the !ct should (e issued after o(taining a$$ro$riate
a$$ro.al from "om$etent !uthorit0.

NPA MANAGEMENT
II Issue of notices
3er.ice of $ro$er notice is a $re)re:uisite for enforcement of securit0 interest.
Ience4 it should (e ensured that $ro$er notices are ser.ed on the (orro/ers< guarantors
/ho ha.e created the securit0 interest.
T$e #ut$orit for #&&ro,i"( &ro&o!#' for i!!ui"( "oti%e #"d t#5i"( A%tio" u"der t$e SARFAESI
A%t i! #! u"der 0-
*Rs. In La,h+
E;ecuti.e Director
9eneral Manager< 3cale SII
D0. 9en. Manager< 3cale SI
!sst. 9en. Mgr.< 3cale S
"hief Manager < 3cale IS
3enior 1ranch Manager *Large 1ranch+
3cale III
ull $o/ers
2800.00
1000.00
G80.00
280.00
80.00
10.00
Note>
1. #he amounts re$resent suit claims< contractual dues.

2. #he delegatee a$$ro.ing issue of notice should not ha.e sanctioned the credit
$ro$osal. In such a case4 it should (e su(mitted to the ne;t higher authorit0.
6. #he $o/ers are to (e e;ercised (0 the chief incum(ent at the 1ranch. In res$ect of
administrati.e< controlling< Xonal JQces4 designated oQcers of the ran, of "hief
Manager< 3cale IS and a(o.e ma0 e;ercise the a(o.e delegation /ithin their
functional area.
7. !t Iead JQce Le.el the $o/ers /ill (e e;ercised (0 D0. 9eneral Manager
*La/<!RD+ on/ards as $er the a(o.e delegation.
Ot?er im,ortant instructions regarding issuing of notices>
a+ #hough a$$ro.al for issuing notices can (e gi.en as a(o.e4 notices are signed (0
the oQcer dul0 authorised (0 the Xonal Manager as U!uthorised JQcer>.
(+ #he $eriod of notice /ill (e D0 da0s.

NPA MANAGEMENT
c+ Notices can (e issued not onl0 to the $rinci$al (orro/er (ut also to the guarantor if
securit0 interest is created (0 the guarantor. Io/e.er4 if no securit0 is created (0
the (orro/er (ut onl0 (0 the guarantor then notice can (e issued JNLY to the
guarantor /ho has created securit0 and the (orro/er should (e issued usual
RECALL NOTICE. Notices must (e issued in the $rescri(ed format4 s$ecimen of
/hich are gi.en in !nne;ure I - II.
d+ #he ser.ice of the notice is to (e made (0 Regd. Post < !.D.4 3$eed Post4 "ourier4 E)
mail4 OP"4 a; etc. In case of non)deli.er0 of ser.ice4 the ser.ice is to (e a2ected (0
aQ;ing the notice on the cons$icuous $art of the (uilding /here the (orro/er <
guarantor resides and < or carries on (usiness and also on the $ro$ert0 in /hich the
securit0 interest is created. It ma0 also (e $u(lished in t/o leading ne/s$a$ers4 one
in .ernacular language ha.ing suQcient circulation in that localit0 and the other in
English.
e+ Khere the (orro/er is a 1od0 "or$orate4 the Demand Notice shall (e ser.ed on the
Registered JQce and also on an0 of the (ranches of such 1od0 "or$orate as
s$eci5ed under 3u( Rule *1+ of Rule 6 of 3ecurit0 Interest Enforcement Rules 2002.
f+ Khen there is more than one (orro/er4 the Demand Notice shall (e ser.ed on each
(orro/er.
g+ In case of Loint inancing<Multi$le Lending4 /hene.er it is decided to $roceed under
the !ct4 all the 1an,s shall issue their notices se$aratel0 for their res$ecti.e dues.
h+ #he !uthorised JQcers so issuing the notice as /ell as monitoring and follo/ u$ of
the
action /ill ha.e immunit0 granted for all !ction done in good faith and /ithout
negligence /hile e;ercising the right on the securities created.
III ObHection 8 &e,resentation recei%ed from t?e borro+er on recei,t of
Notice>
!fter issuance of notice under 3ection 16*2+ of the 3!R!E3I !ct (0 the 1an,4 if an0
(orro/er<guarantor ha.ing the securit0 interest ma,es a re$resentation or raises an0
o(%ection4 then the 1an,4 (eing a secured creditor4 has to consider such re$resentation or
o(%ections and if the 1an, comes to the conclusion that such re$resentation or o(%ection is
not acce$ta(le or tena(le4 then the 1an, has to communicate /ithin one +ee= from
recei$t of such re$resentation or o(%ection4 the reasons for non)acce$tance of the
re$resentation or o(%ections to the (orro/er. ! three mem(er Xonal "ommittee headed (0
Xonal Manager should 5nalise the re$l0 in all cases irres$ecti.e of an0 amount. It is made
clear that at the stage of communication of reasons4 it shall not confer an0 right u$on the
(orro/er to $refer an a$$lication to the DR# under 3ection 1G or the "ourt of District Ludge
under 3ection 1G! of the said !ct.

NPA MANAGEMENT
II Designating C?ief Managers and abo%e as Aut?orised OJcers@
In terms of the $ro.isions of the aforesaid !ct4 the rights of the secured creditor
under the !ct ma0 (e e;ercised (0 one or more of his oQcers authorised in this (ehalf. !s
$er the de5nition gi.en in the Rules4 &!uthorised JQcer' means an oQcer not less than a
"hief Manager of a Pu(lic 3ector 1an, or e:ui.alent as s$eci5ed (0 the 1oard of Directors
of the secured creditor. #he 1oard of Directors has accorded a$$ro.al for designating all
the oQcers of the ran, of "hief Manager and a(o.e of the 1an, as &!uthorised JQcer' for
e;ercising the $o/ers of the 1an, under 3!R!E3I !ct4 2002 and for authorising the
concerned Xonal Manager and in his a(sence the 9uardian 9eneral Manager of the Xone
at Iead JQce or else/here to allot s$eci5c cases to !uthorised JQcers.
I Issuance of Notice
Notices ma0 (e sent to the $rinci$al (orro/er<guarantors /ho ha.e created
e:uita(le<legal<Registered mortgage<charge<h0$othecation<assignment in the 1an,>s
fa.our.
II After issuance of 53 da7sF Notice

1ranches need not /ait for com$letion of D0 da0s statutor0 notice $eriod to initiate
follo/ u$ !ction. "ontinuous follo/ u$ and $ersonal contacts should (e made /ith the
(orro/ers so that $ressure is (uilt u$ for li:uidation of the 1an,>s dues.
III Accounts referred to ;I*&>
B#"5 %#" i!!ue "oti%e #"d t#5e &o!!e!!io" #"d ot$er me#!ure! u"der Se%tio" 21 ):* of t$e A%t
for re%o,er of t$e B#"5<! due! J4$ere t$ere i! "o re$#bi'it#tio" !%$eme i" o&er#tio"K 4$e" B>I i! t$e
!o'e B#"5er or our due! #(#i"!t t$e borro4er! %o"!titute 7;E i" ,#'ue of t$e #mou"t out!t#"di"(
#(#i"!t fi"#"%i#' #!!i!t#"%e di!bur!ed to t$e borro4er3! 4$o!e u"it! $#,e bee" referred to BIF7.
8$ere our B#"5 i! "eit$er t$e !o'e B#"5er "or B#"5<! due! %o"!titute 7;E #! #fore!#id. t$e" for t#5i"(
A%tio" u"der t$e A%t. t$e %o"!e"t of !e%ured %reditor! re&re!e"ti"( "ot 'e!! t$#" 7; E i" ,#'ue of t$e
#mou"t out!t#"di"( #(#i"!t !u%$ borro4er i! re-uired. A'ter"#ti,e'. i" !u%$ %#!e! our B#"5 %#" (i,e
%o"!e"t to ot$er !e%ured %reditor! 3 /e#d B#"5 for t#5i"( A%tio". Lo4e,er. our B#"5 mu!t i!!ue t$e
Noti%e u"der Se%tio" 21 )2* for our dues onl04 after ta,ing $ermission from a$$ro$riate
authorit0. Jnce the Notice is issued and<or $ossession of a secured asset is ta,en or an0
other measure under 3ection 16 *7+ is ta,en (0 an0 of the secured creditor then the
reference (efore 1IR shall a(ate and further !ction for reco.er0 of 1an,>s dues can (e
initiated < continued (efore other forums4 DR#s etc.
IIII Enforcement action in suit #led 8 D&T accounts>
#he 9o.ernment has $romulgated an Jrdinance on 11.11.07 named as Enforcement
of 3ecurit0 Interest and Reco.er0 of De(ts La/s *!mendment+ Jrdinanace42007. 10 the

NPA MANAGEMENT
said Jrdinance4 3ection 1B of the DR# !ct has (een amended. #he said Jrdinance /as
re$ealed and the !ct /as $assed and noti5ed in the 9a?ette on 61.12.07. #he amended
3ection 1B of the DR# !ct $rohi(its the 1an,s and inancial Institutions from ta,ing
simultaneous action under the 3!R!E3I !ct as /ell as DR# !ct. Prior to the a(o.e said
amendment4 the 1an,s /ere ta,ing simultaneous action for reco.er0 under the 3!R!E3I
!ct as /ell as DR# !ct. Io/e.er4 1an, of India has ta,en a .ie/ that the said !mendment
!ct is not ha.ing retros$ecti.e e2ect i.e. the said amendment (ecame e2ecti.e
$ros$ecti.el0 from the date of the $romulgation of the Jrdinance on 11<11<2007. In case
of suits $ending (efore the amendment of 3ection 1B of the DR# !ct i.e. suits 5led $rior to
11<11<074 1an, can al/a0s ta,e simultaneous action under the 3!R!E3I !ct as also the
DR# !ct.
!s regards the suit 5led<decreed cases after 11<11<2007 /here the 1an, had not ta,en an0
action so far under the 3!R!E3I !ct and it no/ desires to ta,e action ie after t?e
issuance of t?e Ordinance4 then in our .ie/ a suita(le a$$lication ma0 (e 5led (efore
the Ion>(le DR#<"i.il "ourt to ,ee$ the 1an,>s J!<3uit ad%ourned /ith li(ert0 to the 1an,
to re.i.e the same after the com$letion of the $roceedings initiated under the 3!R!E3I
!ct. It is $ossi(le that the Ion>(le DR#<"ourt ma0 not entertain the 1an,>s !$$lication in
that case the 1an, /ill ha.e to continue the $roceedings (efore the Ion>(le DR#<"ourt as
/ithdra/ing the J! < 3uit against the (orro/ers<guarantors4 the 1an, ma0 lose its legal
right to 5le fresh J! < 3uit as it /ill (e hit (0 the $ro.isions of the Limitation !ct. Ke ma0
clarif0 that for issuing Notice under 3ection 16 *2+ of the said !ct4 $ermission of DR#<"ourt
is not re:uired.
Needless to mention4 1ranches should ensure that (efore $roceeding under the 3!R!E3I
!ct in Pending 3uit iled !ccounts4 the rights of the 1an, as mortgagee< h0$othecatee are
not (arred (0 La/ of Limitation.
"nforcement Action )
A If full $a0ment is made during the notice $eriod4 no further !ction is called for. If
$art $a0ment is made4 the 1an, retains the right to claim the (alance amount.
; If the (orro/er < guarantor fails to meet their lia(ilit0 in full /ithin D0 da0s from the
date of notice then the !uthorised JQcer ma0 (0 himself or through em$anelled
Enforcement !genc0 ta,e one or more of the follo/ing measures@
#a,e $ossession of the secured assets
#a,e o.er the management of the secured assets.
!$$oint a $erson to manage the assets so ta,en o.er.
Issue notice for collection of recei.a(les < (oo, de(ts
1an, can also sell or lease out the (usiness and ta,e o.er the management of the
"om$an0.

NPA MANAGEMENT
In case the (orro/er refuses $eaceful handing o.er of the secured assets4 1an, can
also 5le an a$$lication (efore the concerned "hief Metro$olitan Magistrate <District
Magistrate for ta,ing $ossession of the secured assets.
C #he $ossession should not (e ta,en as a matter of routine. ! due diligence should
(e conducted in res$ect of secured assets to (e ta,en into $ossession co.ering
nature and .alue of such asset4 $ro(a(ilit0 of 5nding a (u0er in the shortest $eriod
*it /ill (e (etter if a (u0er is identi5ed (efore underta,ing the e;ercise+4 e;$enses
to (e incurred in connection /ith safe,ee$ing< storage4 a$$ointment of securit0
guards4 estimated realisa(le .alue of the assets in case of sale4 etc. #he total costs
and e;$enses incurred should not (e dis$ro$ortionate to the amount of .alue of
securit0 and reco.er0 e;$ected.
D Procedure for ta=ing ,ossession8sale of t?e secured assets
;efore ta=ing Possession
i. Khere secured assets are intended to (e ta,en in $ossession4 a $reliminar0 .isit (0
the !uthorised JQcer4 if necessar0 along /ith the 1oard !$$ro.ed Saluer to the site
is desira(le to assess the li,el0 res$onse of the (orro/er4 realisa(le .alue of the
assets4 the re:uirement of technical su$$ort4 man$o/er and items necessar0 for
e2ecti.el0 ta,ing $ossession of the secured assets4 guarding and<or ta,ing the
same in $ro$er custod0. If the attitude of the (orro/er is hostile and it a$$ears to
the !uthorised JQcer that the (orro/er shall not $eacefull0 hando.er the secured
assets or the $remises are found loc,ed4 the !uthori?ed JQcer must see, the
assistance of the "hief Metro$olitan Magistrate<District Magistrate in terms of
$ro.isions of 3ection 17 of the !ct in consultation /ith Legal De$t. of the
Xone<1an,>s Panel !d.ocate for ta,ing o.er the $ossession of the secured assets.
ii. #he decision to ta,e $ossession of the secured assets /ill solel0 de$end u$on the
reali?a(le .alue of the secured assets and the e;$enses the 1an, is li,el0 to incur
to/ards storage4 securit04 insurance etc. If the reali?a(le .alue of the secured
assets is less than the e;$enses li,el0 to (e incurred (0 the 1an, then (efore
initiating the enforcement !ction4 the !uthorised JQcer should (ring this fact to the
notice of the Xonal Manager and see, the instructions. #he Xonal Manager should
consider the issue in its entiret0 and considering the demonstrati.e e2ect of the
e;ercise decide the further course of !ction.
iii. Ia.ing made the assessment as stated in the $receding $aras4 the !uthorised
JQcer4 after ma,ing necessar0 $re$aration should $roceed to ta,e $ossession. Ie
must ha.e co$ies of the Notice ser.ed on the (orro/er<guarantor. Ie should (e
accom$anied (0 hamal<ma?doors4 car$enter *as $er re:uirement+ securit0 guards
from a$$ro.ed agenc04 t/o inde$endent /itnesses and a Saluer a$$ro.ed (0 the
1oard. Ie should also carr0 necessar0 formats as $er !$$endi; to the 3ecurit0

NPA MANAGEMENT
Interest *Enforcement+ Rules for $re$aration of Panchnama4 in.entor04 Possession
Notice4 $ad loc,s and other necessar0 items for $utting the secured assets under
loc, and seal of the 1an, /here.er necessar0. ! 3ign 1oard sho/ing 1an,>s
$ossession of the site<secured assets ma0 also (e carried for $utting it u$ at the
site.
i.. 1efore ta,ing $ossession of the secured assets4 the !uthorised JQcer must ensure
that the $ro$ert0 /hich is sought to (e ta,en into $ossession is listed in the notice
and the descri$tion thereof tallies. or this $ur$ose the !uthorised JQcer should
carr0 $hotoco$ies of the charge creating documents i.e. Memorandum of
Entr0<I0$othecation Deed etc.
D (0 Mo%able Assets
a+ Ta=ing Possession
Normall0 the mo.a(le assets are stoc,s in trade4 /or, in $rogress4 ra/ material4
5nished goods4 semi 5nished goods4 $arts4 tools4 stores4 mo.a(le machiner04 (oo, de(ts4
recei.a(les etc. or as ma0 (e h0$othecated<charged to the 1an,. !uthorised JQcer
assisted (0 $ersons accom$an0ing him shall ta,e $ossession of the $ro$ert0 in the
$resence of t/o inde$endent /itnesses. Possession should (e ta,en after sunrise and
(efore sunset.
i. Panchnama shall (e $re$ared and signed (0 the t/o inde$endent /itnesses and the
!uthorised JQcer. #he Panchnama should (e dra/n as nearl0 as $ossi(le in
accordance /ith AnneAure III. Necessar0 details as re:uired in the format4 as $er
facts and circumstances of the case should (e mentioned in the Panchnama *Rule 7
*1++.
ii. !fter ta,ing o.er the $ossession4 the !uthorised JQcer shall ma,e or cause to (e
made an In.entor0 of the $ro$ert0 immediatel0 in the form gi.en in !$$endi; II to
the Rules. #he In.entor0 must gi.e all the re:uisite $articulars of the $ro$ert0 e.g.
descri$tion of the article4 estimated .alue etc. as $er re:uirements in the AnneAure
II. !$art from the necessar0 $articulars as re:uired in the format of In.entor04
details a(out :ualit0<:uantit04 measurements4 nature<condition of the $ro$ert0
should (e mentioned in the in.entor0. It is to (e signed (0 the !uthorised JQcer
and the (orro/er or his authorised re$resentati.e. In case there is refusal (0 the
(orro/er<re$resentati.e to sign the in.entor04 a statement to that e2ect must (e

NPA MANAGEMENT
recorded in the In.entor0 as /ell as Panchnama and signed (0 the t/o inde$endent
/itnesses and the !uthorised JQcer.
iii. !uthorised JQcer shall deli.er or cause to deli.er the co$0 of the In.entor0 to the
(orro/er or an0 other $erson entitled to recei.e it on (ehalf of the (orro/er. !n
ac,no/ledgment should (e o(tained. In case of refusal4 the fact of refusal should (e
recorded in the In.entor0. ! co$0 of the In.entor0 should (e des$atched to the
(orro/er (0 Registered Post /ith ac,no/ledgement due<fa; or E)mail. In.entor0 is
to (e attached to the Panchnama.
i.. 3ecured assets shall (e ,e$t in the custod0 of the !uthorised JQcer or in the
custod0 of an0 other $erson authorised or a$$ointed (0 him in this (ehalf. #he
sei?ed assets shall (e ta,en care of in the same manner as the o/ner of ordinar0
$rudence /ould ta,e of his o/n assets. Onder no circumstances the $ossession of
the asset should (e /ith the Enforcement !gents a$$ointed (0 the 1an,.
.. #he !uthorised JQcer shall ta,e ste$s for $reser.ation and $rotection of secured
assets. Khere.er the secured assets are not insured or insurance co.erage has
e;$ired4 the !uthorised JQcer shall ta,e insurance co.erage< continue it till the
assets are dis$osed o2. !n inde$endent godo/n</arehouse *as $er re:uirement+
should (e identi5ed<made a.aila(le /ith inde$endent access to the 1an, /herein
sei?ed assets could (e stored and all necessar0 ste$s should (e ta,en for $rotecting
and $reser.ing the sei?ed assets including arrangement of securit0 agenc0 for
$ro.iding securit0 guards to $rotect the secured assets from theft4 $ilferage etc.
.i. If the sei?ed assets are su(%ect to s$eed0 or natural deca0 or the e;$enses of
,ee$ing such assets in custod0 are li,el0 to e;ceed its .alue4 the !uthorised JQcer
ma0 direct sale of such goods immediatel0 so as to $re.ent loss due to deca0 after
com$leting the aforesaid formalities. In such an e.ent the !uthorised JQcer shall
ha.e to issue 3ale "erti5cate to the $urchasers in the $rescri(ed form as gi.en in
AnneAure I on recei$t of Pa0ment. #he 3ale "erti5cate shall s$ecif0 the mo.a(le
secured assets sold4 $rice $aid and the name of the $urchaser.
(+ Ialuation 8 /ale of t?e Mo%able Assets
i. !fter ta,ing $ossession of the mo.a(le assets and (efore the sale4 the !uthorised
JQcer shall o(tain the estimated .alue of the mo.a(le assets from a Saluer
a$$ro.ed (0 1an,>s 1oard and if considered necessar0 then 5; the Reser.e Price of
the assets in consultation /ith the Xonal Manager.
ii. #he !uthorised JQcer or an0 re$resentati.e of the 1an, should accom$an0 the
Saluers at the time of conducting .aluation.
iii. Saluers should (e ad.ised to furnish a realistic and reasona(le .alue of the assets
after ta,ing into consideration the mar,et conditions and the $resent $rices in
general.

NPA MANAGEMENT
i.. Khere.er $ros$ecti.e (u0ers are not a.aila(le for $urchasing the unit as a /hole4
sei?ed assets should (e sorted out in di2erent lots for the con.enience of e2ecting
sale.
c+ Manner of /ale
#he !uthorised JQcer shall sell the sei?ed assets in one or more lots (0 an0 of the
follo/ing modes to secure ma;imum $rice for the assets to (e sold@
i. 10 o(taining :uotations from $arties dealing in the sei?ed assets or other/ise
interested in (u0ing the sei?ed assets.
ii. 10 in.iting tenders from $u(lic
iii. 10 holding $u(lic auction or
i.. 10 $ri.ate treat0.
d+ /ale Notice - To ;orro+er8o+ner of assets
#he !uthorised JQcer must ser.e to the 1orro/er a Notice of 60 da0s for sale of the
mo.a(le assets. 3er.ice of 3ale Notice is to (e done in the same manner as Demand
Notice under 3ection 16*2+ of the !ct is ser.ed. #he !ct<Rules do not $rescri(e an0 format
for this notice. #his Notice should contain the Reser.e Price4 5;ed if an0 and mode of sale4
$lace4 date and time of sale and should gi.e the (orro/er an o$$ortunit0 to $artici$ate in
the sale $rocess.
e+ Publication of /ale Notice in Ne+s,a,ers
If the sale is (eing e2ected (0 either in.iting tenders from $u(lic or (0 holding $u(lic
auction4 a Pu(lic Notice in t/o leading ne/s$a$ers4 one in .ernacular language4 ha.ing
suQcient circulation in that localit0 must (e $u(lished. 3ale can (e conducted onl0 after
e;$ir0 of 60 da0s from the date on /hich the 3ale Notice /as $u(lished in the ne/s$a$er
or after e;$ir0 of 60 da0s from the date of ser.ice of the 3ale Notice to the
(u0er<guarantor /hiche.er is later. #he Pu(lic Notice shall set out the terms of sale4 /hich
ma0 include the follo/ing@

NPA MANAGEMENT
i. Details a(out the (orro/er and 1an,.
ii. Descri$tion of mo.a(le secured assets to (e sold /ith identi5cation mar,s or
num(ers if an0 on them=
iii. Reser.e Price4 if an04 and the time and manner of $a0ment=
i.. #ime and $lace of $u(lic auction or the time after /hich sale (0 an0 other mode
shall (e com$leted=
.. De$ositing earnest mone0 as ma0 (e sti$ulated (0 the 1an,=
.i. #ime and $lace for ins$ection of the mo.a(le assets=
.ii. !n0 other thing /hich the !uthorised JQcer considers it material for the $urchaser
to ,no/ in order to %udge the nature and .alue of the mo.a(le assets=
Khere.er 3ale Notice is (eing $u(lished in ne/s$a$er a co$0 thereof should (e sent to
the (orro/er along /ith 60 da0s 3ale Notice referred a(o.e.
f+ Ins,ection b7 Pros,ecti%e Purc?asers
#he $ros$ecti.e $urchasers<tenderers /ill ha.e to (e $ro.ided /ith the details of
assets under sale and o$$ortunit0 for ins$ection. or con.enience4 a common date and
time ma0 (e 5;ed for ins$ection for all $ros$ecti.e $urchasers and intimation to this e2ect
to (e made $art of the 3ale Notice to (e $u(lished in ne/s$a$er.
g+ /ale b7 Public Tender
Khere.er sale is to (e conducted (0 Pu(lic #ender4 all the tenders recei.ed should
(e o$ened (0 the !uthorised JQcer in the $resence of the #enderers and hence date4 time
and $lace of o$ening the #enders should also (e mentioned in the 3ale Notice.

h+ /ale b7 ot?er met?ods t?an ,ublic auction8,ublic tender
3ale (0 an0 method other than $u(lic auction or $u(lic tender shall (e on such
terms as ma0 (e settled (et/een the $arties in /riting. Io/e.er4 an endea.our should (e
made to get the ma;imum sale $rice for the assets i.e. more than the Reser.e Price.
urther4 if the amount o2ered is less than the Reser.e Price4 the $ro$ert0 can (e sold (0
the !uthorised JQcer onl7 +it? t?e consent of t?e ;an= and borro+er8guarantor
ie o+ner of t?e ,ro,ert7
i+ Issuance of /ale Certi#cate

NPA MANAGEMENT
Khere mo.a(le secured assets are sold4 sale $rice of each lot shall (e $aid as $er
the terms of the $u(lic notice or as $er terms settled (et/een the $arties as the case ma0
(e and in the e.ent of default of $a0ment the secured assets shall (e lia(le for sale again.
Jn $a0ment of sale $rice4 the !uthorised JQcer shall issue 3ale "erti5cate in the
$rescri(ed form as gi.en in AnneAure I to the said Rules s$ecif0ing the mo.a(le secured
assets sold4 $rice $aid and name of the $urchaser and thereafter the sale shall (ecome
a(solute. #he 3ale "erti5cate so issued shall (e $rima facie e.idence of title of $urchaser.
#he $ossession of the assets sold shall (e deli.ered to the $urchaser.
%+ /ale of ot?er mo%able assets
#he aforesaid $rocedure /ith necessar0 change shall (e follo/ed /hile ta,ing
$ossession and selling the follo/ing mo.a(le secured assets also@
) ! mortgage4 charge4 h0$othecation of mo.a(le $ro$ert0.
) !n0 right or interest in the securit0 /hether full or $art underl0ing at de(t or
recei.a(le *$a0a(le to the 1an,+.
) !n0 (ene5cial interest in the $ro$ert0 or in a de(t or recei.a(le.
,+ No /ale or Transfer if Dues are ,aid

If the dues of the 1an, together /ith all costs4 charges and e;$enses incurred (0
1an, are tendered to the 1an, at an0 time (efore sale or transfer4 the secured asset shall
not (e sold or transferred (0 the 1an,.
l+ Procedure relating to ot?er secured assets not in ,ossession of t?e
borro+er
i. If the secured asset is in the form of a de(t *not secured (0 negotia(le instrument+
not in $ossession of the (orro/er4 the !uthorised JQcer shall o(tain $ossession or
reco.er the de(t (0 ser.ice of notice $rohi(iting the (orro/er from reco.ering the
de(t or an0 interest thereon and the de(tor from ma,ing $a0ment thereof to the
(orro/er and directing the de(tor to ma,e such $a0ment to the !uthorised JQcer.
ii. If the secured assets are shares in a (od0 cor$orate4 the !uthorised JQcer shall
ser.e a notice directing the (orro/er to transfer the same to the 1an, and also the
(od0 cor$orate from not transferring such shares in fa.our of an0 $erson other than
1an,. ! co$0 of such notice so sent shall (e sent to the concerned 1od0 "or$orate>s
Registrar to the Issue or 3hare #ransfer !gent4 if an0.
iii. In case of an0 other mo.a(le $ro$ert04 the !uthorised JQcer shall ser.e the notice
u$on the (orro/er and the $erson in $ossession of such assets4 calling u$on them
to hando.er the same to !uthorised JQcer and the !uthorised JQcer shall ta,e
custod0 of such mo.a(le $ro$ert0 in the same manner as a$$lica(le to mo.a(le
secured assets as aforesaid.

NPA MANAGEMENT
D 10 Immo%able Pro,erties
( Ta=ing Possession
1efore ta,ing $ossession of immo.a(le $ro$ert0 the !uthorised JQcer shall (e
guided as far as $ossi(le (0 the guidelines as a$$earing a(o.e .ide $ara I *i+ to *i.+.
i. #he immo.a(le $ro$ert0 to (e ta,en into $ossession ma0 (e house4 residential Rat4
o$en $lot of land4 factor0 land and (uilding4 industrial 9ala4 /arehouse4 Plant -
Machiner0 $ermanentl0 attached to earth etc. !s $er nature of the $ro$ert04
a$$ro$riate $re$arations should (e done for e2ecti.el0 ta,ing $ossession thereof
and ,ee$ing the same in safe custod0 and care.
ii. Possession of the immo.a(le $ro$ert0 shall (e ta,en (0 deli.ering Possession
Notice4 to the 1orro/er<9uarantor /hose $ro$ert0 is (eing ta,en in $ossession.
Du$licate of Possession Notice has to (e aQ;ed on the outer door or most .isi(le
$art of the $ro$ert0 itself. If the $ro$ert0 is land and large in area4 a notice (oard
also can (e 5;ed gi.ing the details of Possession Notice. Khere there is refusal to
ac,no/ledge the Possession Notice4 then the Possession Notice is to (e ser.ed in
the same manner as demand notice issued under 3ection 16 *2+ of the !ct is
ser.ed.
iii. Possession Notice shall (e $u(lished in t/o leading dail0 ne/s$a$ers *one in
.ernacular<local language+ ha.ing /ide circulation in that localit0.
i.. Khile ta,ing $ossession of immo.a(le $ro$ert0 including $lant and machiner0
em(edded to the earth or $ermanentl0 fastened to an0thing attached to the earth4
the !uthorised JQcer or an0 $erson a$$ointed (0 him shall $re$are in.entor0 of
such assets gi.ing full descri$tion and condition thereof including trade mar,4
ca$acit04 sur.e0 nos.4 e;tent4 (oundaries etc. #he in.entor0 should also contain all
the mo.a(le assets<contents found in the $remises4 /hich are ta,en $ossession or
attached to the $remises. 3uch in.entor0 should (e .eri5ed /ith t/o inde$endent
/itnesses and should (e $re$ared as far as $ossi(le in the form gi.en in AnneAure
II and should (e deli.ered to (orro/er or an0 $erson entitled to recei.e it on (ehalf
of (orro/er *i.e. o/ner of such assets+
.. #he Rules do not s$ecif0 an0 Panchnama in case of immo.a(le $ro$ert0 (ut it is
ad.isa(le to record a Panchnama detailing the fact of ta,ing o.er of $ossession4 its
time4 date etc4 in.entor0 of mo.a(les4 if an04 signed (0 t/o inde$endent /itnesses.
.i. In case of ta,ing $ossession of residential $ro$erties under 3ection 16 *7+ *a+4 if
$eaceful $ossession of such residential $ro$erties is $ossi(le4 a Panchnama /ith t/o
inde$endent /itnesses is a must and the Panchnama should contain the details of
all the contents of such $remises such as furniture4 5ttings etc. If mo.ea(le assets
found are not charged to 1an, then the assets should (e handed o.er to the true
o/ner against $ro$er ac,no/ledgement. If the same is not $ossi(le then In.entor0

NPA MANAGEMENT
of such mo.a(les should (e $re$ared as aforesaid and the immo.a(les should (e
,e$t in safe custod0 and true o/ner (e noti5ed for ta,ing $ossession along /ith a
co$0 of In.entor0.
.ii. E.en if $ossession is o(tained under an Jrder of the Magistrate4 a Memorandum
recording handing<ta,ing o.er the $ossession should (e dra/n disclosing all the
contents of such $remises such as furniture4 5ttings etc. follo/ed (0 handing o.er of
Possession Notice (0 the !uthorised JQcer to the (orro/er and $u(lication of
Possession Notice in the ne/s$a$ers as aforesaid.
.iii. If the $ossession of the immo.a(le $ro$ert0 has (een ta,en4 the $ro$ert0 has to (e
,e$t in the custod0 of the !uthorised JQcer or in the custod0 of an0 other $erson
authorised or a$$ointed (0 !uthorised JQcer in this (ehalf /ho shall ta,e as much
care of the $ro$ert0 in his custod0 as a o/ner of ordinar0 $rudence /ould4 under
the similar circumstances4 ta,e of his $ro$ert0. Ience4 the assets ta,en into
$ossession must (e maintained /ith care and all necessar0 re$airs<cleaning u$
o$erations (e carried out so as to maintain the $ro$ert0 in $ro$er condition. Onder
no circumstances the $ossession of the $ro$ert0 should (e gi.en to the
Enforcement !gents a$$ointed (0 the 1an,.
i;. #he !uthorised JQcer shall ta,e ste$s for $reser.ation and $rotection of secured
assets and insure them4 if necessar04 till the0 are sold or other/ise dis$osed of. If
the sei?ed assets are alread0 insured (0 the (orro/er4 the same ma0 (e rene/ed. If
not4 the same must (e insured u$to such .alue as ma0 (e deemed necessar0 and
a$$ro$riate (0 the !uthorised JQcer ta,ing into consideration the reali?a(le .alue
of such $ro$ert0.
1 Ialuation 8 /ale of Immo%able Pro,ert7
i. #he concerned (ranch must (e in touch /ith $ros$ecti.e (u0er*s+ *$refera(l0 (efore
e;$ir0 of notice $eriod of D0 da0s+ for selling sei?ed assets in order to ensure that
there /ill not (e an0 de$reciation in .alue of the assets and costs for $reser.ing the
assets are minimum.

NPA MANAGEMENT
ii. 1efore e2ecting sale of the immo.a(le $ro$ert0 ta,en into $ossession4 the
!uthorised JQcer shall o(tain .aluation of the $ro$ert0 from a Saluer a$$ro.ed (0
the 1oard.
iii. #he !uthorised JQcer or an0 re$resentati.e of the 1an, should accom$an0 the
Saluers at the time of conducting .aluation. ! co$0 of the #itle Deed should (e
ta,en during such ins$ection to identif0 the $ro$ert0 and to ensure that the
$ro$ert0 as $er #itle Deeds is same as that (eing .alued.
iv. Saluers should (e ad.ised to furnish a realistic and reasona(le Salue of the assets
ta,ing into account the mar,et conditions and $resent $ro$ert0 $rices in general.
v. #he !uthorised JQcer shall 5; the Reser.e Price for the $ro$ert0 in consultation
/ith the Xonal Manager. In case the a$$ro.al for !ction in the account has (een
accorded (0 an authorit0 a(o.e the ran, of Xonal Manager4 then Xonal Manager
shall o(tain a$$ro.al of such authorit0 for 5;ing Reser.e Price and accordingl0
communicate to the !uthorised JQcer.
vi. !fter 5;ing the Reser.e Price the !uthorised JQcer ma0 sell the /hole or an0 $art
of such immo.a(le $ro$ert0 (0 an0 of follo/ing methods to ensure ma;imum $rice
of such $ro$ert0 @
a+ (0 o(taining :uotations from the $ersons dealing /ith similar $ro$ert0 or
other/ise interested in (u0ing such $ro$ert0 or
(+ (0 in.iting tenders from the $u(lic
c+ (0 holding $u(lic auction4 or
d+ (0 $ri.ate treat0.
vii. #he !uthorised JQcer shall ser.e to the (orro/er a notice of thirt0 da0s for sale of
the immo.a(le $ro$ert0. 3er.ice of 3ale Notice is to (e made in the same manner
as ser.ice of Demand Notice is made. #he !ct<Rules do not $rescri(e an0 format for
this notice. #his notice should contain the Reser.e Price 5;ed4 mode of sale4 $lace4
date and time of sale and should gi.e the (orro/er an o$$ortunit0 to $artici$ate in
the sale $rocess.
viii. If the sale is conducted (0 in.iting tenders from $u(lic or (0 holding $u(lic auction4
a Pu(lic Notice is to (e $u(lished in t/o leading dail0 ne/s$a$ers4 one in .ernacular
language4 ha.ing suQcient circulation in that localit0 the other in English (0 setting
out the terms of the sale including the follo/ing@
a+ Name of the 1an, and the (orro/er<guarantor i.e. o/ner of the $ro$ert0.
(+ Descri$tion of the immo.a(le $ro$ert0 to (e sold4 including the details of the
encum(rances ,no/n to the secured creditor.

NPA MANAGEMENT
c+ #he secured de(t for reco.er0 of /hich the $ro$ert0 is to (e sold.
d+ Reser.e Price (elo/4 /hich the $ro$ert0 ma0 not (e sold.
e+ #ime and $lace of Pu(lic !uction or the time after /hich sale (0 an0 other mode
shall (e com$leted.
f+ De$ositing earnest mone0 as ma0 (e sti$ulated (0 the !uthorised JQcer of the
secured creditor.
g+ !n0 other thing /hich the !uthorised JQcer considers material for a $urchaser to
,no/ in order to %udge the nature and .alue of the $ro$ert0.
Khere.er 3ale Notice is (eing $u(lished in ne/s$a$ers a co$0 thereof should (e sent to
the (orro/er along/ith 60 da0s 3ale Notice referred a(o.e.
ix. #he Notice of 3ale should also (e aQ;ed on a cons$icuous $art of the immo.a(le
$ro$ert0 to (e sold. If the !uthorised JQcer deems 5t4 the 3ale Notice ma0 (e $ut
on the 1an,>s /e(site also.
x. #he !uthorised JQcer<concerned 1ranch must ma,e arrangement for facilitating
the ins$ection of $ro$ert0 under sale and information to this e2ect should (e
mentioned in
the 3ale Notice. or the sa,e of con.enience a common date<s and time ma0 (e
5;ed
for ins$ection (0 $ros$ecti.e (idders<$urchasers.
xi. In case of sale (0 o(taining :uotations from interested $arties4 :uotations from at
least 6 interested $arties should (e in.ited #he in.itation for :uotations should (e
mailed to as man0 interested $arties as $ossi(le. (or e!amp"e# if t$e immo%a&"e
propert' to &e so"( is fa)tor' "an( an( &*i"(ing# t$e intereste( parties )o*"( &e
o+ners of properties in t$e neig$&o*r$oo(# o+ners of fa)tories engage( in simi"ar
A)ti%it' et).).
xii. Khere.er sale is to (e conducted (0 Pu(lic #ender4 all the tenders recei.ed should
(e o$ened (0 the !uthorised JQcer in the $resence of the #enderers and hence
date4 time and $lace of o$ening the #enders should also (e mentioned in the 3ale
Notice.
xiii. 3ale (0 an0 method other than Pu(lic !uction or Pu(lic #ender shall (e on such
terms as ma0 (e settled (et/een the $arties in /riting.
xiv. E.er0 endea.our should (e made to o(tain a $rice a(o.e the Reser.e Price and the
$ro$ert0 has to (e sold onl0 to the Purchaser /ho has o2ered the highest sale $rice
in his (id or tender or :uotation or o2er. urther4 if the amount o2ered is less than
the Reser.e Price4 the $ro$ert0 can (e sold (0 the !uthorised JQcer onl0 /ith the
consent of the 1an, and (orro/er<guarantor i.e. o/ner of the $ro$ert0.

NPA MANAGEMENT
xv. 3ale (0 an0 method can (e conducted onl0 after e;$ir0 of 60 da0s from the date on
/hich the 3ale Notice /as $u(lished or from the date of ser.ice of 3ale Notice to the
(orro/er<guarantor *i.e. o/ner of the $ro$ert0+ /hiche.er is later. Assets s?all be
sold in fa%our of t?e ,urc?aser +?o ?as o9ered t?e ?ig?est ,rice in ?is
bid8tender or 'uotation or o9er to t?e Aut?orised OJcer and t?e sale s?all
be subHect to t?e con#rmation b7 t?e ;an=
xvi. Jn e.er0 sale of immo.a(le $ro$ert04 the $urchaser shall immediatel0 $a0 a
de$osit of t/ent0 5.e $ercent of the amount of the sale $rice4 to the !uthorised
JQcer conducting the sale and in default of such de$osit4 the $ro$ert0 shall
forth/ith (e sold again.
xvii. #he (alance amount of $urchase $rice $a0a(le shall (e $aid (0 the $urchaser to the
!uthorised JQcer on or (efore the 5fteenth da0 of con5rmation of sale of the
immo.a(le $ro$ert0 or such e;tended $eriod as ma0 (e agreed u$on in /riting
(et/een the $arties.
xviii. In default of $a0ment /ithin the $eriod mentioned as a(o.e4 the de$osit and
earnest mone0 shall (e forfeited and the $ro$ert0 shall (e resold and the defaulting
$urchaser shall forfeit all claims to the $ro$ert0 or to an0 $art of the sum for /hich
it ma0 (e su(se:uentl0 sold.
xix. Jn con5rmation of sale (0 the 1an, and if the terms of $a0ment ha.e (een
com$lied /ith4 the !uthorised JQcer e;ercising the $o/er of sale shall issue a
"erti5cate of 3ale of the immo.a(le $ro$ert0 in fa.our of the $urchaser in the form
gi.en in !$$endi; S to the said Rules. !ll e;$enses relating to stam$ dut04
registration etc. including all costs4 charges and e;$enses in relation thereto are to
(e (orne (0 the $urchaser.
xx. Khere the immo.a(le $ro$ert0 sold is su(%ect to an0 encum(rances4 the !uthorised
JQcer ma04 if he thin,s 5t4 allo/ the $urchaser to de$osit /ith him the mone0
re:uired to discharge the encum(rances and an0 interest due thereon together /ith
such additional amount that ma0 (e suQcient to meet the contingencies or further
cost4 e;$enses and interest as ma0 (e determined (0 him.
xxi. Jn such de$osit of mone0 for discharge of the encum(rances4 the !uthorised
JQcer ma0 issue or cause the $urchaser to issue notices to the $ersons interested
in or entitled to the mone0 de$osited /ith him and ta,e ste$s to ma,e the $a0ment
accordingl0.
xxii. #he !uthorised JQcer shall deli.er the $ro$ert0 to the $urchaser free from
encum(rances ,no/n to the secured creditor on de$osit of mone0 as s$eci5ed
a(o.e.
xxiii. #he "erti5cate of 3ale issued in res$ect of $ro$ert0 under encum(rances shall
s$eci5call0 mention that the $urchaser has $urchased the immo.a(le secured asset
free from an0 encum(rances ,no/n to the secured creditor or not.

NPA MANAGEMENT
E /ecured Assets in ,ossession 8custod7 of t?e Court8Court
&ecei%er8OJcial Li'uidator8Pro%isional OJcial Li'uidator
Khere the assets to (e ta,en into $ossession are in $ossession<custod0 of the
a(o.e noted authorit04 the !uthorised JQcer can not ta,e $ossession of such
assets /ithout s$eci5c and $rior $ermission from the concerned "ourt etc. #his
restriction /ould a$$l0 in case of assets (elonging to a cor$orate (orro/er against
/hich /inding u$ order has (een $assed (0 the "om$an0 "ourt.
* Immo%able ,ro,ert7 in ,ossession of tenants
3ec. 16*7+ of the !ct em$o/ers the 3ecured "reditor <!uthorised JQcer to ta,e
$ossession of the $ro$ert0 either !ctuall0 or constructi.el0 and transfer it (0 /a0 of
lease<assignment<sale and an0 such transfer of secured assets after ta,ing
$ossession shall .est in the transferee as if the transfer has (een made (0 o/ner of
the assets. Io/e.er4 such deeming $o/er has (een gi.en to the secured
creditors<!uthorised JQcers onl0 for the limited $ur$ose of releasing the securities
to con.e0 good mar,eta(le title to the (u0er (ut $ro$ert0 does not .est in the
secured creditor<!uthorised JQcer4 /ho shall not ha.e an0 $o/er to e.ict a tenant
/ho is in la/ful $ossession of such $ro$ert0. In such cases4 the !uthorised JQcer
can ta,e constructi.e $ossession of the $ro$ert0 after o(ser.ing the necessar0
formalities as $ro.isions of the Rules and as detailed in this !nne;ure. 3uch
$ro$erties can (e sold on as is /here is (asis i.e. su(%ect to tenanc0
rights<encum(rance. #he !uthorised JQcer can ser.e notice to the tenants under
3ection 16 *7+ *d+ of the !ct for $a0ment of the rents to the 1an, and on recei$t of
rent the !uthorised JQcer can gi.e the tenant a .alid discharge (0 issuing
recei$ts. Io/e.er4 /here the tenant does not a$$ear to (e (ona5de (ut tenanc0
a$$ears to ha.e (een created in conni.ance /ith the (orro/er then the !uthorised
JQcer should immediatel0 (ring facts to the ,no/ledge of Legal De$t. of the Xone
for guidance.
G Constructi%e 8 /7mbolic ,ossession
In this regard4 the $ro$erties in $ossession of the tenants4 ta,ing s0m(olic
$ossession of the $ro$erties4 as a rule4 ma0 not (e the a$$ro$riate mode and the
same ma0 not ser.e an0 $ur$ose and there ma0 (e com$lications in cases
in.ol.ing unscru$ulous (orro/ers<o/ners of the immo.a(le $ro$erties. Ke e;$lain
this as under @)

NPA MANAGEMENT
1. Possession is ta,en in order to hand o.er the same to the $urchaser of the $ro$ert0
on con5rmation of the sale. 30m(olic $ossession /ill not ensure !ctual $ossession
of the $ro$ert04 /hich the intending $urchaser /ill re:uire. !$art from that4 /hen
the $ro$ert0 is not in .acant $ossession of the 1an,4 the same ma0 not attract fair
.alue as it should (ecause of the uncertaint0 and the a$$rehension in the minds of
the intending $urchaser a(out some litigation follo/ing the sale in order to th/art
the deli.er0 of $ossession. !s such4 !ctual and .acant $ossession in the hands of
the 1an, shall al/a0s command highest $rice as com$ared to a situation /here
onl0 s0m(olic $ossession is o(tained (0 the 1an,.
2. In case s0m(olic<constructi.e $ossession is ta,en (0 deli.ering the co$0 of
Possession Notice4 then an0 unscru$ulous o/ner of such $ro$ert0 ma0 tr0 to $art
/ith the $ossession of the $ro$ert0 and contend that he has alread0 deli.ered
$ossession of the $ro$ert0 to the 1an, against Possession Notice. #his situation /ill
(e .er0 com$licated /hen the 1an, /ill ha.e to account for the same. No
Enforcement !gent need (e a$$ointed to ta,e s0m(olic < constructi.e $ossession.
6. 30m(olic<constructi.e $ossession /ill ha.e to (e con.erted into !ctual $ossession
at the time or after the sale of the $ro$ert04 as .acant $ossession has to (e gi.en to
the $urchaser of the $ro$ert0 unless the $urchaser agrees to $urchase /ithout
insisting for .acant $ossession. Ience4 for aforesaid reasons4 it is not ad.isa(le to
$ost$one ta,ing of !ctual $ossession4 as a rule. Io/e.er4 in s$eci5c cases in.ol.ing
s$ecial circumstances4 s0m(olic $ossession ma0 (e ta,en after follo/ing formalities
e.g. $ro$ert0 in $ossession of tenants or /here ta,ing $ossession of the $ro$ert0
/ill entail large e;$enses for maintaining and safe guarding the $ro$ert0 and the
o/ner of such $ro$ert0 is coo$erati.e enough to e;ecute necessar0 declaration and
underta,ing in fa.our of the 1an, stating that 1an, has ta,en $ossession of the
$ro$ert0 and4 at his re:uest4 the 1an, has again $ut him in $ossession of the
$ro$ert0 as its agent and that he /ill hold the $ossession on (ehalf of the 1an, as
the agent4 and shall (e res$onsi(le for maintaining the same. 3uch a $erson /ill
further underta,e that he shall hand o.er .acant $ossession of the $ro$ert0 (ac, to
the !uthorised JQcer of the 1an, /ithin a s$eci5c time frame *sa0 /ithin se.en
da0s+ of (eing as,ed to do so4 failing /hich4 the 1an, can mo.e the "hief
Metro$olitan Magistrate<District Magistrate u<s 17 of the !ct for regaining the
$ossession. #he draft of such underta,ing ma0 de$end on facts and circumstance of
each case and can (e $re$ared in consultation /ith Legal De$tt < Panel !d.ocate of
the Xone.
A,,ro,riation of sale ,roceeds K/ection () .40L
!ll costs4 charges4 e;$enses incurred (0 the secured creditor are reco.era(le 5rst
from the $roceeds of assets sold. Ience $ro$er records < documents $ertaining to
ser.ice of notice4 ac,no/ledgement of notice4 $roof of ser.ice4 $u(lication of
notices etc. and account relating to e;$enses incurred should (e maintained.
!fter sale of secured assets the a$$ro$riation of sale $roceeds reali?ed is to (e done
as $er the $ro.isions of 3ection 16*G+ in the follo/ing order@

NPA MANAGEMENT
irstl0 to/ards costs charges and e;$enses incidental thereto4 /hich are
reco.era(le from the (orro/er. "osts incurred (0 the secured creditor for
$reser.ation and $rotection of securities4 insurance $remium and other
e;$enses /ill (e reco.era(le from the sale $roceeds.
3econdl0 to/ards the dues of the secured creditor.
If there is an0 residue it is to (e $aid to the $erson entitled thereto in accordance
/ith his rights and interests.
#he order of $a0ment contained in this su()3ection gi.es recognition to the rights
of secured creditors to reali?e their securities in $reference to all other creditors
and other $referential $a0ments of the dues $a0a(le to 9o.ernment4 la(our etc.
#his $ro.ision and order of $a0ment is su(%ect to $ro.isions of 3ections 82B and
82B! of the "om$anies !ct in res$ect of com$anies under /inding u$. 3u(%ect to
$ari $assu charge on the assets of the "om$an0 under /inding u$ for /or,men>s
dues4 or $ari $assu or 5rst charge of an0 other creditor su()3ection *B+ does not
recognise $riorit0 of an0 other creditor or claimant o.er the claim of the secured
creditors.
&eco%er7 of /?ort-fall Amounts
If the sale $roceeds realised in the enforcement !ction are not suQcient to li:uidate
1an,>s dues then the 1an, /ill ha.e to 5le reco.er0 suit < DR# a$$lication (efore "i.il
"ourt < DR# for enforcing the $ersonal co.enant against the (orro/er < guarantor. #he
issuing of notices under the !ct does not e;tend the limitation $eriod and on the date of
5ling 3uit < DR# a$$lication for reco.er0 of the dues4 the documents must (e ali.e. Ience
the limitation $eriod should (e ,e$t trac, of and it should (e ensured to 5le reco.er0 suit <
a$$lication (efore "i.il "ourt < DR# (efore e;$ir0 of limitation $eriod for $ersonal decree4
not/ithstanding issue of notice< !ction under the !ct.
Ot?er matters>
APP"A*
If an0 $erson is aggrie.ed (0 an0 of the measures ta,en under 3ection 16 *7+ of the !ct (0
the 1an,4 he ma0 5le an a$$lication to DR# +it?in 6! da7s from the date on /hich such
measures ha.e (een ta,en under 3ection 1G of the 3!R!E3I !ct along /ith such fee as
ma0 (e $rescri(ed. or 5ling of such a$$lication no de$osit is re:uired to (e de$osited (0
the (orro/er or such $erson. #he DR# has (een gi.en $o/er to consider /hether !ction
ta,en (0 the 1an, to enforce securit0 is in accordance /ith the $ro.isions of the !ct and
Rules. If the DR# comes to the conclusion that !ction ta,en (0 the 1an, is not in
accordance /ith $ro.isions of the !ct and Rules then (0 an order it can declare the !ction
ta,en (0 the 1an, as in.alid and restore $ossession of the secured assets to the (orro/er
and $ass such orders as it ma0 consider a$$ro$riate and necessar0. #he DR# has to $ass
the orders +it?in 53 da7s time. Io/e.er4 the said time can (e e;tended (0 the DR# u$to
four months. If the DR# does not decide the a$$lication /ithin four months time then an0

NPA MANAGEMENT
$art0 ma0 a$$roach DR!#4 for directing DR# for e;$editious dis$osal of the a$$lication
$ending (efore the DR#.
If an0 $erson aggrie.ed (0 an0 Jrder made (0 the DR# under /ection (4 ma0 $refer an
a$$eal to the De(t Reco.er0 !$$ellate #ri(unal /ithin thirt0 da0s from the date of recei$t
of the order of the DR# along /ith such fee as ma0 (e $rescri(ed. No a$$eal shall (e
entertained unless the (orro/er de$osits 80H of the amount of de(t due from him or
determined (0 the DR# /hiche.er is less. #he !$$ellate #ri(unal ma0 for reasons to (e
recorded in /riting reduce the amount to not less than 28H of the de(t.
#he $ro$erties s$eci5call0 charged /ith de(t reco.era(le under the !ct are lia(le to (e
attached and sold *though the same are not lia(le to attachment or sale in e;ecution of a
decree as $er su()3ection *1+ of 3ection D0 of the "ode of "i.il Procedure4 1B0E+ meaning
there(0 that the securities s$eci5call0 charged to the 1an, can (e enforced. It ma0 (e
noted that as $er 3ection D0*1+*(+ and *c+ of "P"4 the agricultural $roduce and the
house<(uilding (elonging to an agriculturist is not attacha(le under a decree (ut the same
can (e enforcea(le under the 3!R!E3I !ct if the same is charged to the 1an,.
a+ 1an,ers to !ct in good faith and reasona(l0 and should not go o.er (oard in
e;ercising the $o/er under the !ct.
(+ No "i.il "ourt can interfere in the lender>s right. #he (orro/er < guarantor /ho o/ns
the securities can 5le !$$eal (efore the D.R.#.4 if aggrie.ed (0 the enforcement
measures ta,en (0 the 1an, under 3ection 16*7+ of the !ct.
c+ !ll costs< charges< e;$enses incurred (0 the secured creditor are reco.era(le from
the $roceeds of assets sold.
d+ Interest calculation for arri.ing at the contractual dues should (e as $er the
agreement. Io/e.er4 as $er %udgement of 3u$reme "ourt4 com$ounding<
ca$italisation of $enal interest is not $ermissi(le. It should (e therefore4 .eri5ed and
com$ounding e2ect4 if an04 in res$ect of amount of $enal interest should (e
e;cluded in the amount of claim stated in the notice.
e+ #he *(orro/er<guarantor+ de(tor can not alienate or meddle /ith the securit0
charged once he recei.es the Notice under the !ct e;ce$t for re$a0ing the dues of
the secured creditor.
f) Right to compensation to borrower
3ection 1B of the !ct $ro.ides that the DR# < DR!# can direct the secured creditor to
return to the (orro/er the assets ta,en o.er and also ma,e $a0ment of com$ensation and
costs to him in case DR# < DR!# 5nds that $ossession ta,en /as /rongful. Ience ade:uate

NPA MANAGEMENT
care must (e ta,en to ensure that *i+ securit0 is .alid and enforcea(le and *ii+ the assets
(elong to (orro/er < guarantor.
g) Immunity granted to secured creditor and his ofcers
3ection 62 of the !ct $ro.ides immunit0 (0 la0ing do/n that no suit4 $rosecution or
other legal $roceedings /ill lie against an0 secured creditor or an0 of its oQcers or
Managers e;ercising an0 rights of the secured creditor for an0thing done or omitted to
done in good faith.

h+ Mone04 /hich is due4 can (e reco.ered from third $art0 /ho has ac:uired the
secured assets of the *(orro/er<guarantor+ de(tor (0 gi.ing notice to him in this
regard.
i+ #he !ct co.ers onl0 the .arious 3E"ORI#IE3 !"#O!LLY "I!R9ED #J #IE 1!NW.
%+ E.en if the guarantor>s assets are not charged to the 1an,4 a co$0 of the notice
ser.ed on the Princi$al De(tor should (e endorsed to all such guarantors for
in.o,ing their guarantees.
,+ O$on enforcement !ction as in 16*7+4 an0 reference of the 1orro/er "om$an04
$ending (efore 1IR gets a(ated. !s $er the !ct4 $rior a$$ro.al of 1IR is not
re:uired for initiating !ction under the !ct. Io/e.er4 1IR shall (e informed a(out
our !ction under 3!R!E3I !ct and a(atement of reference made (0 the com$an0
under 3I"!.
A,,ro%al for Deferment Of Action
In all notice issued accounts /here no com$romise has (een a$$ro.ed<no
reco.er0 is forthcoming4 $ossession should (e ta,en in.aria(l0 /ithout e;ce$tion4
after com$letion of mandator0 D0 da0s notice $eriod.
In case the (ranch /ants to defer ta,ing $ossession for some .alid and cogent
reason $rior $ermission from the 9eneral Manager *La/+ < 9eneral Manager *NP!
Management+ of Iead JQce should (e ta,en. 3uch re:uests for deferment of
!ction *in notice issued accounts+ should (e sent to Iead JQce4 !RD4
*3ecuritisation "ell+ /ithin a $eriod of 60 da0s from the com$letion of the
mandator0 D0 da0s $eriod. #he Xones should ensure that the (orro/er>s re:uest
for deferment should (e %usti5ed (0 $a0ment of reasona(le amount
commensurate /ith the dues in the account. #he re:uest for deferment should (e
on merits and in onl0 selected cases.


NPA MANAGEMENT
E.en in accounts /here com$romise $ro$osals are under negotiation<$rocess
$ossession of the secured assets should (e ta,en. !s and /here the com$romise is
a$$ro.ed /ith necessar0 u$front $a0ment the $ossession ma0 (e released /ith the
condition that re$ossession /ill (e ta,en in case of default of $a0ment of com$romise
accounts as $er sti$ulation<a$$ro.al.
NPA Accounts +?ere Agricultural Land Bas ;een Gi%en As
/ecurit7
Man0 of the NP! accounts are categorised as non)eligi(le accounts under the $ro.isions of
3!R!E3I !ct due to the onl0 reason that the land mortgaged to the 1an, is an
!gricultural Land *!L+ /hich is e;em$ted from the $ro.isions of the !ct. Io/e.er4 it is
o(ser.ed that in man0 such cases commercial<industrial<allied !cti.ities are carried out (0
the o/ners on such land /ithout o(taining N! Permission *i.e. getting $ermission from the
com$etent authorit0 for con.erting the land from !gricultural use to Non)!gricultural use+.
Ins$ections of all such accounts should (e conducted and it should (e .eri5ed /hether an0
commercial<industrial<allied !cti.it0 is carried on such agricultural land. If it trans$ires that
the o/ner is carr0ing on such !cti.it0 then the 1an, can al/a0s $roceed to enforce such a
securit0 under the 3!R!E3I !ct. #o su(stantiate the 1an,>s !ction under the 3!R!E3I
!ct4 it is necessar0 that the 1an, is ha.ing some documentar0 e.idence that the land in
:uestion is used for commercial<industrial<allied !cti.ities. It is suggested that the
(ranches a$$roach the local Pat/ari<#ehsildar<Pancha0at<9o.t. De$t. and o(tain from him

NPA MANAGEMENT
a "erti5cate as regards the !cti.it0 carried out on such land as also ta,e $hotogra$hs to
$ro.e that commercial !cti.it0 is carried on. E.en if the land is declared as !gricultural
Land and if an0 commercial < industrial !cti.it0 is carried on or other/ise used for allied
non)agricultural $ur$oses4 then also !ction ma0 (e initiated under the 3!R!E3I !ct.
1
&ECOIE&M 8 EN*O&CEMENT AGENT/
&eco%er7 Agents
1+ Khere reco.er0 is not forthcoming4 the 1an, ma0 e;$lore the a.enue of engaging
the ser.ices of &eco%er7 Agents. #hese include 9o.ernment !gencies4 N9Js4
3I9s4 !d.ocates on the 1an,>s $anel4 re$uted "or$orate 1odies<irms and
indi.iduals /ith $ro.en trac, record.

NPA MANAGEMENT
2+ Mostl0 in cases /here there is no tangi(le securit0 a.aila(le to the 1an, such as
3tar 3u.idha accounts4 clean o.erdrafts4 de(its due to India "ard usage and other
accounts ma0 (e handed o.er to the Reco.er0 !gents. !$art from the a(o.e4 the
ser.ices of Reco.er0 !gents ma0 also (e a.ailed of @)
a+ Khere the e;ecution $roceedings ha.e not 0ielded an0 results
(+ Khere the (ids ha.e failed after $utting u$ the suit $ro$erties and attached
$ro$erties for sale
c+ Khere the 1an, has to reco.er the (alance amount of decree after sale of
charged and attached assets either through e;ecution of decree or 3!R!E3I
action
6+ It ma0 im$ortantl0 (e noted that all out reco.er0 e2orts should (e made (0 the
1ranch sta2. Jnl0 if Min house> $rocedures (0 our o/n $ersonnel fail to 0ield the
desired results4 then onl0 Moutsourcing> (0 engaging the ser.ices of Reco.er0 !gents
should (e resorted to. Moreo.er4 it is ad.isa(le to use Moutsourcing> onl0 /hen the
account (ecomes MDou(tful> or MLoss> asset4 and at initial stages /hen the account is
in M3u(standard> categor0 1ranch machiner0 should (e utilised for reco.er0
$ur$oses. In other /ords4 onl7 after com,letion of (1 mont?s from t?e date
of NPA2 ser%ices of &eco%er7 Agents are to be utilised.
7+ !t the time of a$$ointing Reco.er0 !gent4 the 1an, should enter into an !greement
cum Indemnit0 /ith the said !gent /herein the terms of reco.er0 and charges are
clearl0 mentioned. #he Jriginal !greement cum Indemnit0 dul0 e;ecuted (0 the
Reco.er0 !gent shall (e ,e$t on the 1an,>s record. Li,e/ise4 /hilst entrusting the
NP! account to the Enforcement !gent under the 3!R!E3I !ct 20024 a letter should
(e issued to the Enforcement !genc0 listing out the terms and conditions of our
1an,. #he du$licate co$0 of the said letter dul0 signed (0 the Enforcement !gent in
to,en of ha.ing agreed to the terms and conditions should (e ,e$t on the 1an,>s
records. #his $rocedure shall hel$ to a.oid an0 dis$utes in future /ith the Reco.er0
!gent<Enforcement !gent. ! s$ecimen of the !greement cum Indemnit0 is gi.en in
the !nne;ure F M!>
8+ It is of $aramount interest that the indi.iduals < 5rms etc. a$$ointed as Reco.er0 <
Enforcement !gents are of clean image and good re$utation and the0 do not .iolate
an0 legal $ro.isions and guidelines issued (0 R1I < 9o.ernment.
D+ #he em$anelment of Reco.er0 !gents is done (0 Xonal JQce and is a$$ro.ed (0
the Xonal Manager.
G+ #he follo/ing as$ects should (e loo,ed into /hile a$$ro.ing the Reco.er0 !gents F
a+ Past e;$erience4 ca$a(ilities4 relia(ilit0 should (e gi.en due consideration

NPA MANAGEMENT
(+ #he0 should (e o2ering their ser.ices to Nationali?ed 1an,s4 inancial
Institutions4 3tate inancial "or$orations < !gencies
c+ La/0ers4 Legal 5rms can also (e considered for a$$ointment as Reco.er0 !gents
and Enforcement !gents

d+ irms4 $ersons connected /ith the (orro/ers< guarantors *against /hom decree
is to (e e;ecuted+ should not (e a$$ointed
e+ ! reference ma0 (e o(tained from other 1an,s4 inancial Institutions4 etc. for
em$anelling of Reco.er0 !gents and Enforcement !gents. Xonal JQces shall
maintain all records and list of the $anel of Reco.er0 !gents and Enforcement
!gents.
W&ITE O** POLICM
Krite o2 is resorted to in the (orro/al accounts /hen the 1an, has e;hausted all $ossi(le
a.enues of reco.er0 and there are no more chances for e2ecting the reco.er0.
Krite o2 is of t/o ,inds F Prudential write off and Reg*"ar +rite o,. #he (asic di2erence
(et/een $rudential and regular /rite o2 is that in Prudential /rite o2 there is $ossi(ilit0 of

NPA MANAGEMENT
reco.er0 at a distant future e.en after /rite o2 /hile in Regular /rite o2 there is no< little
$ossi(ilit0 of reco.er0.
It is o$en to the 1an, to resort to $artial /rite o2 also. Partial /rite o2 /ould (e in the
accounts classi5ed as dou(tful assets4 to the e;tent of $ro.ision held on the outstanding
and not co.ered (0 an0 securit0.
I0 &egular Write o9
) General conditions @
! Regular /rite o2 /ill (e considered on the ha$$ening of *i+ and *ii+ and an0 of the
*iii+ to *.ii+ (elo/ @)
i. !ccount is classi5ed as Loss !sset.
ii. 100H $ro.ision is held in such accounts as at the end of $re.ious accounting 0ear.
iii. Prior a$$ro.al for /ai.er of legal action including /here account is alread0 time
(arred<termination of suit $roceedings</ai.er of a$$eal etc. should (e o(tained
(efore considering regular /rite o2. #ermination of suit $roceedings shall mean that
$ending legal action shall (e ta,en to the logical conclusion.
i.. !ll e2orts for reco.er0 ha.e (een ta,en to their conclusion4 (0 means of action
under /&*AE/I Act2 legal action4 e;ecution of decree4 etc. and there is a(solutel0
no $ros$ect for an0 further reco.er0
.. In e;ce$tional cases4 /here the (orro/er *and guarantor4 /here.er a$$lica(le+ has
or ha.e e;$ired4 or their /herea(outs cannot (e traced in s$ite of all e2orts4 and
there is no securit0 /hich can (e realised
.i. "ases /here all e2orts of reco.er0 ha.e (een ado$ted and the remaining (alance
and circumstances are such that an0 further e2ort is considered cost)ine2ecti.e
.ii. !s a result of a negotiated settlement in an0 account4 /here an0 $ortion of the
outstanding (alance4 unrealised interest and<or uncharged interest < charges is
agreed to (e /ritten o2 or /ai.ed4 this /rite o2 shall (e e2ected after recei$t of full
com$romise amount $lus interest if an04 as $er terms of J#3 a$$ro.ed. No s$eci5c
a$$ro.al is re:uired for this since the /rite o2 is $art of com$romise settlement
dul0 a$$ro.ed (0 com$etent authorit0
12.1.2. T?e Aut?orit7 for a$$ro.al of sacri5ce in a +rite o9 ,ro,osal /ill (e as under@
)7!.i" '#5$*

NPA MANAGEMENT
II0 Prudential Write O9
Prudential /rite o2 should (e e2ected /ithout im$acting the accounts at the (ranch le.el.
In other /ords4 the /hole e;ercise of $rudential /rite)o2 has to (e restricted to selecti.e
NP! accounts and as such to (e reRected in accounts onl0 at I.J.
) General conditions >
1. Prudential /rite)o2 of accounts $artiall0 or full0 /ill (e ado$ted in the case of
dou(tful and loss assets /here the follo/ing conditions are satis5ed@
i. !ll Dou(tful < Loss assets /ith outstanding of Rs.1)crore and a(o.e as of last
(alance sheet date /ill (e ta,en u$ for consideration.

ii. 3uit should ha.e (een generall0 5led in the account in case of non)1IR cases.
iii. !ll a.enues of reco.er0 including reha(ilitation < restructuring <com$romise
must (e e;$lored (efore /rite o2
2. #he amount (eing /ritten)o2 should (e co.ered (0 the $ro.isions held in the
account at the end of the $re.ious accounting 0ear.

6. In the case of E"9"<DI"9" guaranteed accounts4 residual amount after ad%ustment
of claim could (e /ritten o2 if there is no $ros$ect of reco.er0 in the near future.

7. In case of 1IR accounts4
i. Khere 1IR has sanctioned J#3 scheme4 outstanding (alance in e;cess of the
J#3 amount ma0 (e /ritten o2 $ending recei$t of J#3 amount.
Management "ommittee ull $o/ers
E;ecuti.e Director
9eneral Manager4 I.J.4 !RD
9eneral Manager *Xonal Manager+
D0.9eneral Manager< 3cale SI
!sst. 9eneral Manager<3cale S
"hief Manager 3cale IS
Manager *large 1ranch+ 3cale III
80.00
6G.80
60.00
28.00
20.00
10.00
2.80
1.00

NPA MANAGEMENT
ii. If /inding u$ has (een ordered (0 1IR4 amount of shortfall in securit0 ma0 (e
/ritten o2.
iii. If 1IR has sanctioned a Reha(ilitation scheme4 amount of /rite)o2 or /ai.er of
$rinci$al or interest under the scheme ma0 (e /ritten o2 *su(%ect to 1an,>s
right of recom$ense+.
Aut?orit7
!uthorit0 to a$$ro.e $rudential /rite)o2s .ests /ith the Management "ommittee.

NPA MANAGEMENT
;ID POLICM
Man0 a times4 in s$ite of 1an, successfull0 o(taining an auction order from court< DR#4 the
actual im$lementation and achie.ing the (ene5ts there(0 are eluding4 mainl0 due to the
follo/ing reasons@
i. Man0 a times due to inRuence e;erted (0 the defendants4 no (id o2ers are recei.ed
(0 the "ourt< DR#s leading to $ost$onement of the scheduled auction more than
once.
ii. Recent instances re.eal that in the a(sence of (idders to the suit $ro$erties4 "ourt<
DR#s ha.e indicated to the 1an, that such e;ecution $etitions /ould (e dis$osed o2
as unfructi5ed. #his /ould mean that the 1an,>s recourse for reco.er0 is a2ected
ad.ersel0.
iii. #he defendants form a cartel of $ros$ecti.e (u0ers /ith intention to ensure that the
$ro$erties fetch much lo/er $rice than their mar,et .alue and thus succeed in
scuttling 1an,>s interest.
i.. 1id Polic0 em$o/ers the 1an, to enter the auction as a $ros$ecti.e (idder<
$urchaser.
/co,e
In all cases /here (id< auction orders ha.e (een issued (0 the "ourt< DR#s etc. and no (id
o2er is recei.ed till the time of auction< (id4 1an, ma0 $artici$ate in the (id for $urchase
of the suit $ro$ert0<ies su(%ect to o(tention of a$$ro.al at the a$$ro$riate le.el.

NPA MANAGEMENT
/ALE O* *INANCIAL A//ET/ TO A//ET
/EC<&ITI/ATION COMPANIE/ 8 A//ET
&ECON/T&<CTION COMPANIE/ .A/Cs 8A&Cs0
a+ 3R!E3I !ct has (rought into $icture a ne/ dimension of NP! Management for
1an,s in /hich 1an,s can reduce their NP!s (0 dis$osing o2 the NP! to !sset
Reconstruction "om$anies. #his $olic0 aims at ta,ing ad.antage of the $ro.isions of
this !ct for e2ecti.e sale of the 5nancial assets and reduction of NP!s and /ith
attendant issues. #his $olic0 does not address sale of standard assets4 as the issues
to (e addressed on securitisation of standard assets are di2erent from those of
NP!s.
(+ 3R!E3I !ct has 6 (road features )
1. 3ecuritisation - !sset Reconstruction "om$anies
2. "entral Registr0
6. Enforcement of 3ecurit0 Interest
c+ #he guidelines on sale of 5nancial assets to !3" < !R" ha.e $rescri(ed 2 distincti.e
areas of o$eration /here(0 1an,s are F
) re:uired to sell the 5nancial assets to !3" < !R"
) in.est in !3" < !R" in the form of 3ecurit0 Recei$ts *3R+4 Pass #hrough "erti5cates
1 *P#"+4 1onds4 De(entures4 etc.
*inancial Assets +?ic? can be sold>
! 5nancial asset ma0 (e sold to the !3" < !R" (0 an0 1an, < I /here the asset is)
) !n NP!4 including a non $erforming (ond < de(enture and
) ! 3tandard !sset /here@
i. the asset is under consortium < multi$le (an,ing arrangements4
ii. at least G8H (0 .alue of the asset is classi5ed as non)$erforming asset in the (oo,s
of
other 1an,s < Is and
iii. at least G8H *(0 .alue+ of the 1an,s < Is /ho are under the consortium < multi$le
(an,ing arrangements agree to the sale of the asset to !3" < !R"

NPA MANAGEMENT
;OA&D *O& IND</T&IAL AND *INANCIAL
&ECON/T&<CTION .;I*&0
1oard for Industrial and inancial Reconstruction is a (od0 constituted under 3ic,
Industries "om$anies *3$ecial Pro.ision+ !ct *3I"!+ 1BE8. It is a :uasi %udicial (od0 /ith
$o/ers to initiate legal ste$s against erring $romoters /ho fail to a(ide (0 the regulations
of 3I"!. It has the $o/ers to summon and record e.idence and o.er ride some of the
$ro.isions of "om$an0>s !ct.
&eference >
!ll the 3ic, Industrial com$anies /hich are F
a. engaged in manufacturing< $rocessing acti.it04 em$lo0ing 80 /or,ers or more

(. registered for 8 0ears or o.er
c. /hose net /orth has com$letel0 (een eroded as at the end of an0 5nancial 0ear.
are re:uired to ma,e reference to 1IR4 /ithin D0 da0s from the date of ado$tion of annual
accounts< audited (alance sheet at the !nnual 9eneral 1od0 of the concerned com$an0 or
/here the 1oard of directors ha.e come to the conclusion that the com$an0 has (ecome
sic, Industrial com$an0.
#he reference is to (e made in `Form A anne;ed to the !ct. #he secured creditors or an0
other creditors4 1an,s and 5nancial institutions can also ma,e a reference a(out the
com$an0. Jnce a reference is registered4 1IR sends intimation to all concerned $arties
including 1an,s4 inancial Institutions and 9o.t. !gencies.
E9ect of &eference @
#he immediate e2ect of the reference is that F
a. no legal action< reco.er0 action can (e instituted against the (orro/er com$an0 and
the guarantors
(. all $ending cases against the (orro/er< guarantors are sus$ended during the
$endenc0 of reference.
c. #he limitation is sus$ended for the $eriod for /hich the reference is $ending /ith
1IR
Io/e.er4 legal $roceedings can (e instituted< continued after o(taining the $ermission of
1IR.
Management and Research [D0]

NPA MANAGEMENT
Ineligible Cases @
3hi$$ing com$anies4 Industrial units registered as 33IOs and ser.ice units li,e Iotels4 etc.
are not eligi(le for reference.
;an=Fs Position @
It is the res$onsi(ilit0 of the com$an0 ma,ing reference to 1IR to send co$ies of Morm !>
along /ith enclosures to all the secured creditors< 1an,s< inancial Institutions and other
agencies. If ho/e.er4 the com$an0 does not su(mit Uorm !> /ithin reasona(le time4 the
same can (e called for (0 the 1an, (0 sending suita(le communication to the com$an0.
As soon as t?e *orm A is recei%ed2 ;an= s?ould ma=e a detailed G
A 3tud0 of orm ! and 1alance 3heets for the detailed anal0sis in order to .erif0 the
facts leading to such sic,ness4 es$eciall0 F
i. #o ma,e critical com$arati.e anal0sis of all the com$onents of the com$an0>s
audited accounts (oth of re.enue and ca$ital nature at least for the last 8 0ears.
ii. Inconsistencies li,e o.erstating< (oo,ing of e;$enses on ma%or in$uts< understating
of income in the later 0ears in a (id to (ring the unit under the am(it of 3I"!

iii. "om$arati.e stud0 on each in$ut *ra/ material4 $o/ers4 la(our4 etc.+ to sales ratio
to stud0 a(normal .ariations.
i.. !(ru$t change in accounting s0stem li,e method of de$reciation4 $ro.iding
lia(ilities not disclosed earlier4 /rite o2 of (oo, de(ts4 di.ersion of funds outside the
unit (0 si$honing o2 funds4 in an0 manner to other grou$ concerns4 realisation of
(oo, de(ts (0 cash /ithout routing through 1an,ing s0stem.

.. "omments of the auditors on the (alance sheet and an0 contradictor0 stand in orm
!.
; Pre$are a com$rehensi.e status re$ort gi.ing 1an,>s o(ser.ation< comments on the
information gi.en in orm !. In case the reference is to (e o$$osed4 s$eci5c grounds
for o$$osing the reference are to (e (rought out. #he status re$ort ma0(e
su(mitted in the format enclosed.

NPA MANAGEMENT
C !fter getting the a$$ro.al from the com$etent authorit04 5le the status re$ort4 /ith
1IR4 through our 1IR "ell4 Xonal JQce4 Ne/ Delhi. "o$ies of orm ! ma0 (e sent
to functional de$artments in Iead JQce *either !RD or "-I"+.
D Jn the date of 5rst hearing4 1an,>s stand is to (e $resented as a$$ro.ed.
"JN"LO3IJN
#o ensure long term $ro5ta(ilit04 (an,s ha.e to manage NP!s e2ecti.el0 (0 ado$ting
techni:ues li,e @
i. Ensuring that loans are di.ersi5ed across se.eral customer segments
ii. Introducing ro(ust ris, scoring techni:ues to ensure (etter :ualit0 of loans
iii. Im$ro.ing the :ualit0 of credit monitoring s0stem (0 designating a se$arate
credit manager or relationshi$ manager for that $ur$ose
i.. Raising the share of non)fund income (0 increasing ser.ice $roduct o2erings (0
(etter use of technolog0
.. Reducing o$erating e;$enses (0 u$grading the (an,ing technolog0
.i. Monitoring earl0 /arning signals - ta,ing immediate a$$ro$riate remedial action
.ii. !do$ting credit rating s0stem to identif04 measure - monitor the credit ris, of
indi.idual $ro$osal
.iii. Putting certain (orro/al accounts /hich e;hi(it certain distress signals under a
/atch list - $a0ing close attention so that the0 don>t (ecome NP!s
i;. Reducing the im$act of o$erational ris,s (0 measuring them - mitigating or
insuring them
;. Wno/ing a client>s $ro5le thoroughl0 - $re$aring a credit re$ort (0 $a0ing
fre:uent .isits to the client - his (usiness unit
;i. !$$raising credit $ro$osals $rofessionall0 - insisting on timel0 deli.er0 of credit
&emedies a%ailable

NPA MANAGEMENT
In s$ite of good credit management in terms of a$$raising - monitoring of loan
assets NP!s do occur. In such cases remedial measures ha.e to (e ta,en. #he0 are @
Non-legal &emedies>
#hese ma0 (e in the form of com$romise4 mergers - ta,eo.ers. #he goods $ledged
or h0$othecated ma0 (e sold /ithout the inter.ention of the court. #he de(ts can
(e assigned in fa.our of an agenc0 /hich ma0 come for/ard to collect de(ts for a
ser.ice charge.
Legal &emedies>
#he R1I has ad.ised lenders to initiate legal measures including criminal action.
3ome of the measures a.aila(le are@
a. iling of ci.il suits for the reco.er0 of de(ts or for the enforcement of the securit0
(. iling of suits under the 3tate Reco.er0 !cts
c. Referring the cases to De(t Reco.er0 #ri(unals *DR#+ - De(t Reco.er0 !$$ellate
#ri(unal *DR!#+ set u$ under the Reco.er0 of De(ts due to 1an,s - inancial
Institutions !ct4 1BB6
d. Referring cases to Lo,adalats constituted under the Legal 3er.ices !uthorities !ct4
1BEG /hich hel$s in resol.ing dis$utes (et/een the $arties (0 conciliation4
mediation4 com$romise or amica(le settlement. E.er0 a/ard of the Lo,adalat shall
(e deemed to (e a decree of the ci.il court.
e. Resol.ing large loans .ia de(t reco.er0 mechanisms4 most nota(l0 the "or$orate
De(t Restructuring *"DR+ mechanism. Jne #ime 3ettlement *J#3+ schemes ha.e
(een tried /ith good results.
f. Proceeding against the default (orro/er under the 3ecuritisation - Reconstruction
of inancial !ssets - Enforcement of 3ecurit0 Interest !ct *3R!E3I act+4 2002 /hich
came into e2ect on Lune 214 2002. Onder the !ct4 (an,s - 5nancial institutions are
allo/ed to issue demand notices to defaulting (orro/ers - to ta,e $ossession of the
secured asset /ithout the inter.ention of the courts4 if the dues are not $aid /ithin
D0 da0s of the date of such notice. #he $ro.isions of the !ct are not a$$lica(le to
unsecured loans or loans (elo/ Rs. 14004000 or to loans /here the due is less than
20H of the $rinci$al amount - interest thereon.
In 20074 the su$reme court u$held the .alidit0 of the !ct (0 gi.ing one ma%or relief
to the (orro/er)litigant. #he earlier $ro.ision that the (orro/er /ill ha.e to de$osit
G8H of the dis$uted amount (efore a$$ealing has (een scra$$ed. Kith the
im$lementation of the 3R!E3I !ct4 man0 lenders ha.e commenced their reco.er0
action against recalcitrant de(tors. 3ince the su$reme court has u$held the

NPA MANAGEMENT
constitutional .alidit0 of the !ct4 it /ill go a long /a0 in managing NP!s successfull0.
1esides4 the !ct also $ro.ides the formal legal (asis for setting u$ Asset
&econstruction Com,anies .A&C0 in India

NPA MANAGEMENT
&E*E&ENCE/
WE; &E*&ENCE/
o 444.,ed#m!boo5!.%om
o 444.Mi(o"&erf.%om
o ///.r(i.org
o ///.ssrn.com
o ///.economictimes.com
OTBE& &E*&ENCE/
1an,ing
#heor04 La/ - Practice @ 9ordon4 Natara%an
) R1I Re$ort on #rend and Progress of 1an,ing in India4 200D)0G
) R1I Re$ort on Macroeconomic and Monetar0 de.elo$ments in 200G)0E
) !nnual Re$orts Jf 1an,s

NPA Management: N. L. D I M S & R

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NPA MANAGEMENT

N. L. DALMIA INSTITUTE OF MANAGEMENT STUDIES & RESEARCH

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