Professional Documents
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A 101
A 101
DEFINITION OF NPAS
A NPA is a loan or an advance where;
Interest and/ or installment of principal remain overdue for a period of more than 90 days in respect of a term loan, The account remains out of order in respect of an overdraft/ cash credit The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted The installment or interest remains overdue for two crop seasons in case of short duration crops and for one crop season in case of long duration crops
Presented by Mr. S. Ravi 2
CATEGORIES OF NPA
Substandard Assets Which has remained NPA for a period less than or equal to 12 months. Doubtful Assets Which has remained in the sub-standard category for a period of 12 months Loss Assets where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly.
Presented by Mr. S. Ravi 3
PROVISIONING NORMS
Standard Assets general provision of a minimum of 0.25% Substandard Assets 10% on total outstanding balance, 10 % on unsecured exposures identified as sub-standard & 100% for unsecured doubtful assets. Doubtful Assets 100% to the extent advance not covered by realizable value of security. In case of secured portion, provision may be made in the range of 20% to 100% depending on the period of asset remaining sub-standard Loss Assets 100% of the outstanding
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NPA MANAGEMENT
PREVENTIVE MEASURES
Formation of the Credit Information Bureau (India) Limited (CIBIL) Release of Wilful Defaulter s List. RBI also releases a list of borrowers with aggregate outstanding of Rs.1 crore and above against whom banks have filed suits for recovery of their funds Reporting of Frauds to RBI Norms of Lender s Liability framing of Fair Practices Code with regard to lender s liability to be followed by banks, which indirectly prevents accounts turning into NPAs on account of bank s own failure
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NPA MANAGEMENT
PREVENTIVE MEASURES
Risk assessment and Risk management RBI has advised banks to examine all cases of wilful default of Rs.1 crore and above and file suits in such cases. Board of Directors are required to review NPA accounts of Rs.1 crore and above with special reference to fixing of staff accountability. Reporting quick mortality cases Special mention accounts for early identification of bad debts. Loans and advances overdue for less than one and two quarters would come under this category. However, these accounts do not need provisioning
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Lok Adalats
Small NPAs up to Rs.20 Lacs Speedy Recovery Veil of Authority Soft Defaulters Less expensive Easier way to resolve
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DRT Act
The banks and FIs can enforce their securities by initiating recovery proceeding under the Recovery if Debts due to Banks and FI act, 1993 (DRT Act) by filing an application for recovery of dues before the Debt Recovery Tribunal constituted under the Act. On adjudication, a recovery certificate is issued and the sale is carried out by an auctioneer or a receiver. DRT has powers to grant injunctions against the disposal, transfer or creation of third party interest by debtors in the properties charged to creditor and to pass attachment orders in respect of charged properties In case of non-realization of the decreed amount by way of sale of the charged properties, the personal properties if the guarantors can also be attached and sold. However, realization is usually time-consuming Steps have been taken to create additional benches
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Whether Second Amendment to Companies Act and SARFESI Provide effective and compatible enforcement
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Need for new laws & procedures to handle bankruptcy proceedings in consultation with RBI
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Preparation Stage
Thorough study of the case Find out our strengths and weaknesses in the case. Find out the vulnerable point/weaknesses of the borrower. Follow-up with the Borrower and Guarantors. Visit factory/Collaterals/residence. Find out properties not charged to the bank. Indicate that Bank is willing to compromise.
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THANK YOU
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