2. Introduction
The Non-performing Assets have been harrowing Indian banking system for a long
time now, so much so that it is impacting the GDP and overall economy of the
country.
Earlier this year, it was predicted that the NPA levels will surge close to
10.5% in March 2018.
SARFAESI Act, 2002 Debt Recovery Tribunals (DRTs)
Banks, regulatory bodies and the government of India together have been trying to
control the mounting numbers of NPA through several means such as:
Asset Reconstruction
Companies (ARCs)
And others…
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NPA recovery remains a big challenge
It is witnessed that over the years, NPA recovery has been going down in spite of stricter laws and better recovery methods in place.
THE DROP IN NPA RECOVERY OVER THE YEARS
Recovered NPAs (In %)
Recovered NPAs (In crores)
Total NPAs (In crores)
22.00%
18.40%
12.40%
10%
23,300
32,000
30,800
22,800
105,700
173,800
248,200
221,400
-
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Ways to control NPAs
Banks and financial institutions must be more sensible by following a conservative approach for loan disbursement e.g. the repay-
ment tenure should not be stretched for a longer duration.
Rational lending of loans to borrowers
Innovative means of recovering bad loans must be adopted. Banks must consider investing in advance tools having features like
Early Warning Signals, Loan Origination Systems etc. for streamlined lending and recovery practices.
Use of technology
Recovery of loans must be ensured right from the time when the applicant applies for a loan to secure timely payment of instal-
ments. Banks must not wait for accounts to become delinquent after which they have to end up with loan restructuring.
Loan restructuring is not the ‘only’ option
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Ways to control NPAs (Cont.)
RBI must bring in amendments to track and monitor large borrowers and big defaulters. Stricter rules for Oversight
Committee (OC) and Joint Lender’s Forum (JLF) must be introduced without any further delay.
Amending the Banking Regulations Act
Smart practices to assess risks and red-flag borrowers who tend to default must be adopted as a preventive measure
over and above the current recovery modes like SARFAESI, IBC and more.
Stringent Recovery
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Other Possible Ways of minimising NPAs
These are some ways of controlling and reducing NPAs that are yet to prove themselves and deliver the desired outcomes. It would
be interesting to see how these approaches perform in the coming times and add to the economic growth of our country.
Mission Indradhanush (2015),
Insolvency and Bankruptcy Act (2016)
Bad Banks (2017)