Non-Performing Assets or NPA are like a cancer worm that has been destroying the banking system of India slowly and steadily. NPA are bad loans with banks or other financial institutions whose interests and or principal amounts are overdue for a long time. This time is usually 90 days or more. Like any other business, banks also must run on profits, but NPA eats into that margin for banks. Substandard Assets : A sub-standard asset was one, which was classified as NPA for a period not exceeding two years. With effect from 31 March 2001, a sub-standard asset is one, which has remained NPA for a period less than or equal to 18 months.Doubtful Assets : A doubtful asset was one, which remained NPA for a period exceeding two years. With effect from 31 March 2001, an asset is to be classified as doubtful, if it has remained NPA for a period exceeding 18 months.Loss Assets : This occurs when the NPA has been recognized as a loss by the bank, or the internal or external auditor or on Reserve Bank of India (RBI) inspection but the loan has not been forgiven completely. Banks’ lending to persons/corporations etc. who are not creditworthy and taking high risks. Banks are not diminishing their losses by understanding their bank’s sufficiency on capital and loan loss reserves at a given time; Promoter of Companies redirecting their funds elsewhere. Banks trying to fund non-viable projects. In the initial part of the 1990s, Public Sector Banks started experiencing acute capital shortage and losses. The targets set for their operation did not project the utmost need for these corporate goals. The banks had very little autonomy to price their products; offer products to preferred sectors or spend money for their own profits. For example, Banks were forced to lend to priority sector namely agriculture due to political pressure. Deficient means to collect and distribute credit information amongst commercial banks; Banks’ lending to persons/corporations etc. who are not creditworthy and taking high risks. Banks are not diminishing their losses by understanding their bank’s sufficiency on capital and loan loss reserves at a given time; Promoter of Companies redirecting their funds elsewhere. Banks trying to fund non-viable projects. In the initial part of the 1990s, Public Sector Banks started experiencing acute capital shortage and losses. The targets set for their operation did not project the utmost need for these corporate goals. The banks had very little autonomy to price their products; offer products to preferred sectors or spend money for their own profits. For example, Banks were forced to lend to priority sector namely agriculture due to political pressure. Deficient means to collect and distribute credit information amongst commercial banks; Banks must identify early that there is going to be a non-payment and report it to the Central Repository of Information on Large Credits (CRILC).

1. MANGEMENT OF NPA
&
INTEREST RATE STRUCTURE
PRESENTING TO : MRS. POOJA MISHRA MAM
PRESENTING BY : ANKUR SHUKLA
: KSHITIZ AGRAWAL

2. Agenda Meaning of NPA
Factors
Contributing to
NPA
Corrective
actions plan to
arrest increasing
NPAs
Latest Measures
by RBI
MANGEMENT OF NPA
Types Of NPA
Conclusions
SARFAESI ACT
Types of interest
rate Structure
Meaning of Interest
Rate Structure

3. Meaning Of NPA
Non-Performing Assets or NPA are like a cancer worm that has been
destroying the banking system of India slowly and steadily. NPA are
bad loans with banks or other financial institutions whose interests
and or principal amounts are overdue for a long time. This time is
usually 90 days or more. Like any other business, banks also must
run on profits, but NPA eats into that margin for banks.

4. Substandard Assets : A sub-standard asset
was one, which was classified as NPA for a
period not exceeding two years. With effect from
31 March 2001, a sub-standard asset is one,
which has remained NPA for a period less
than or equal to 18 months.
Doubtful Assets : A doubtful asset was one,
which remained NPA for a period exceeding two
years. With effect from 31 March 2001, an asset
is to be classified as doubtful, if it has
remained NPA for a period exceeding 18
months.
Loss Assets : This occurs when the NPA has
been recognized as a loss by the bank, or the
internal or external auditor or on Reserve Bank
of India (RBI) inspection but the loan has not
been forgiven completely.
TYPES OF
NPA

5. Factors Affecting NPAs
• Banks’ lending to persons/corporations etc. who are not creditworthy and taking high
risks.
• Banks are not diminishing their losses by understanding their bank’s sufficiency on
capital and loan loss reserves at a given time;
• Promoter of Companies redirecting their funds elsewhere. Banks trying to fund non-
viable projects.
• In the initial part of the 1990s, Public Sector Banks started experiencing acute capital
shortage and losses. The targets set for their operation did not project the utmost need
for these corporate goals.
• The banks had very little autonomy to price their products; offer products to preferred
sectors or spend money for their own profits. For example, Banks were forced to lend to
priority sector namely agriculture due to political pressure.
• Deficient means to collect and distribute credit information amongst commercial banks;

6. Banks must identify early that there is going to be a non-payment and report it to the Central Repository
of Information on Large Credits (CRILC).
Before a loan account turns into an NPA, Non-Banking Finance Companies (NBFCs) must recognize
emergent stress in the account by creating a sub-asset category i.e. ‘Special Mention Accounts’ (SMA)
with the three sub-categories as given in the table, as per the RBI’s Prudential Framework for
Resolution of Stressed Assets dated June 7th, 2019
Special Mention Accounts (SMA)
Category
Basis of Categorization Principal or interest
payment or any other amount wholly or partly
overdue between
SMA - 0 1 - 30 DAYS
SMA – 1 31 - 60 DAYS
SMA - 2 61 - 90 DAYS
Corrective Action Plan to Arrest increasing NPAs

7. •Lenders must be given incentives to agree to
collectively and quickly plan– if a resolution plan
is already under way, then there must be better
regulatory treatment; if no agreement can be
reached, then accelerated provisioning must be
done.
•Improvement in current restructuring process:
large value restructurings must be independently
evaluated mandatorily, with a focus on viable
plans and a fair sharing of losses (and future
possible upside) between promoters and
creditors.
•Future borrowing for non-cooperative borrowers
with lenders must be made more expensive in
resolution.
LATEST
MEASURES
BY RBI

8. •Asset sales must be given more liberal
regulatory treatment.
•Sector-specific Companies/Private equity firms
must be helped to play an active role in the
stressed assets market.
•Formation of Joint Lenders’ Forum: If an account
is reported to Central Repository of Information
on Large Credits (CRILC) as SMA-2, all lenders
should form a lenders’ committee to be called
Joint Lenders’ Forum (JLF) under a convener
and frame a joint Corrective Action Plan (CAP)
for early resolution of the stress in the account.
This would also include: Rectification;
Restructuring; Recovery of the asset.
LATEST MEASURES BY RBI

9. SARFAESI ACT 2002
• The SARFAESI Act ensures the security interests in movable (tangible or
intangible assets including accounts receivable) and immovable property
without the court’s intervention. A Bank or a Financial Institution can send a
legal notice to the borrower to pay back her liabilities within 6 days from the
date of notice.
• If the borrower is unable to do so, the Bank or Financial Institution (FI) can
exercise all its rights under the SARFAESI Act.
• The Bank or FI can also seize the management of the secured assets.
• Any aggrieved person can appeal to the Debt Recovery Tribunal (DRT) within
45 days after depositing 75% of the amount claimed in the notice.
Securitization and Reconstruction of Financial Assets and
Enforcement of Securities Interest

10. INTEREST RATE STRUCTURE
The term structure of interest rate can be defined as the
graphical representation that depicts the relationship
between interest rates (or yields on a bond) and a range of
different maturities. The graph itself is called a “yield
curve.”
The term structure of interest rates plays an important part
in any economy by predicting the future trajectory of rates
and facilitating quick comparison of yields based on time.

11. TYPES OF INTERST RATE STRUCTURE
#1 – Normal/Positive Yield
The normal yield curve has a positive slope. This stands true for securities
with longer maturities that have greater risk exposure as opposed to short
term securities. So rationally, an investor would expect higher
compensation (yield), thus giving rise to a normal positively sloped yield
curve.
#2 – Steep
The steep yield curve is just another variation of the normal yield
curve just that a rise in interest rates occurs at a faster for long-maturity
securities than the ones with a short maturity.
#3 – Inverted/Negative Yield
An inverted curve forms when there is a high expectation of long-maturity
yields falling below short maturity yields in the future. An inverted yield
curve is an important indicator of the imminent economic slowdown.

12. #4 – Humped/Bell-Shaped
This type of curve is atypical and very infrequent. It
indicated that yields for medium-term maturity are
higher than both long and short terms, eventually
suggesting a slowdown.
#5 – Flat
A Flat curve indicates similar returns for long-term,
medium-term, and short-term maturities.

13. GRAPHICAL REPRESANTATION OF INTEREST
RATE STRUCTURE
NORMAL /
POSITIVE HUMPED / BELL FLAT
STEEP
INVERTED /
NEGATIVE

14. 1-year MCLR is
8.85%
6-month MCLR
is 8.65%
3-month MCLR
is 8.55%
Overnight
MCLR is 8.15%
1-month MCLR
is 8.40%
New Interest Rates by RBI
Presentation Title

15. CONCLUSION
In conclusion it can be said that by taking preventive measures
such as considering the corporate body’s credit score before
lending; banks can go a long way in reducing their
NPAs. Furthermore, after the advent of current legislations such
as IBC, the existing one SARFAESI, along with RBI’s
recommendations, after the loans have become an NPA, banks
also have a post facto redressal mechanism which is speedier
than regular long drawn recovery process in the courts.
The term structure of interest rates is one of the most potent
predictors of economic wellbeing. All recessions in the past have
been linked to inverted yield curves, showing how important a role
they play in the credit market. Yield curves aren’t ever constant.
They keep changing, reflecting the current market mood, helping
the investors and financial intermediaries stay on top of

16. ANY
QUERIES ?
Presentation Title

17. Thank you