Analysis | Securitization | Debt

Table-5.5 Showing the reasons for NPAs in the Banks.

REASONS Improper credit appraisal Lack of effective follow-up Diversion of Funds Absence of security Management failures Decrepit legal system Cost in-effective legal measures Difficulty in execution of decrees Willful default Demand recession Others NO OF RESPONDENTS 8 4 10 2 2 6 6 4 6 2 0 PERCENTAGE 16 8 20 4 4 12 12 8 12 4 0

Chart-5.1

REASONS FOR NPAs IN BANK
REASONS 0% 0% 12% 8% 12% 20% 12% 4% 4% 4% 16% 8% Improper credit appraisal Lack of effective follow-up Diversion of Funds Absence of security Management failures Decrepit legal system

From the graph it is clear that the main reason for NPAs in banks is diversion of funds, improper credit appraisal and willful default followed by decrepit legal system, cost ineffective legal measures, lack of effective follow-up and difficulty in execution of decrees.

Table-5. .2 From the graph it can be interpreted that 76% of the respondents said that they have taken both legal & non-legal measures for recovery of NPAs. while 16% said that they have taken only legal measures and 8% said that they have taken only non-legal measures.6 Showing the measures for recovery of NPAs adopted by the Banks PREFERENCE Legal measures Non-legal measures Both legal and non-legal Others NO OF RESPONDENTS PERCENTAGE(%) 8 4 38 0 16 8 76 0 Chart-5.

.Table-5. while 28% of the respondents said both civil courts and Debt recovery tribunals as recovery mechanisms and 12% said that they adopted Lok Adalats pre-securitization act.3 From the graph it is evident that 32% of the respondents said that they adopted one time settlement scheme for recovery of NPAs.7 Showing the recovery mechanisms adopted by the banks for NPAs. pre-securitization act RECOVERY MECHANISMS Lok Adalats Civil Courts Debt recovery Tribunal One-time settlement schemes Others NO OF RESPONDENTS 6 14 14 16 0 PERCENTAGE(%) 12 28 28 32 0 Chart-5.

16% said Civil courts. 20% said Asset Reconstruction Companies. post securitization act RECOVERY MECHANISMS NO OF RESPONDENTS 2 8 4 10 16 10 0 PERCENTAGE(%) 4 16 8 20 32 20 0 Lok Adalats Civil Courts Corporate Debt Restructuring Debt recovery Tribunal One-time settlement schemes ARC'S/ Securitization Companies Others Chart-5. .8 Showing the recovery mechanisms adopted by the banks for NPAs.4 From the graph it is evident that 32% of the respondents said that they adopted one time settlement schemes as a recovery mechanism for NPAs. 8% said corporate debt reconstruction and 4% said Lok Adalats post-securitization act.5. 20% said Debt recovery tribunals.Table.

.5 From the graph it is clear that 100% of the respondents said that the securitization act has empowered the banks with additional powers by facilitating the setting up of Asset reconstruction companies/Securitization companies.9 Showing the securitization act has empowered the banks with additional power by facilitating the formation of Asset reconstruction/ securitization companies PREFERENCE Yes No NO OF RESPONDENTS 50 0 PERCENTAGE(%) 100 0 Chart-5.Table-5.

9 Showing the enactment of securitization act reduced the level of NPAs in the banks PREFERENCE Yes No Can't say NO OF RESPONDENTS 44 0 6 PERCENTAGE(%) 88 0 12 Chart-5. while 12% said that they can’t say whether the Act has helped in reduction of NPAs in the banks or not. .Table-5.6 From the graph it is evident that 88% of the respondents said that the enactment of the Securitization Act has reduced the level of NPAs in the banks.

.10 Showing the most practicable and effective measures adopted by the banks PREFERENCE One-time settlement schemes Lok Adalats Debt recovery Tribunal Civil Courts Corporate Debt Restructuring ARC'S/ Securitization Companies Others NO OF RESPONDENTS 30 6 6 0 2 6 0 PERCENTAGE(%) 60 12 12 0 4 12 0 Chart-5.7 From the graph it is evident that 60% of the respondents said that One Time Settlement scheme is the most effective recovery mechanism. 12% said debt recovery tribunals and 4% said corporate debt restructuring. 12% said Asset reconstruction companies. while 12% said Lok Adalats.Table -5.

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