This document discusses non-performing assets (NPAs) in banks. It notes that NPAs are loan accounts that do not generate income for the bank. Common causes of NPAs include poor selection of borrowers, lack of timely support, and failure to monitor loans. The document outlines the classification standards for NPAs as standard, sub-standard, doubtful, and loss. It also discusses various legal recovery mechanisms available to banks for recovering NPAs, including Debt Recovery Tribunals, SARFAESI Act, and sale of NPAs to asset reconstruction companies.

1. BY
ANIL KUMAR SINHA

2. NPA ACCOUNTS ARE THOSE
ACCOUNTS WHICH DO NOT YEILD ANY
INCOME OR CEASED TO GENERATE
INCOME FOR THE BANK.

3.  Poor Selection of Borrowers
 Poor Appraisal
 Failure of providing timely support
 Poor follow up and monitoring
 Hesitation to accept project failure or
precipitate PNPA.
 Government Policies
 Unforeseen Circumstances.

4.  Term Loan: Interest and/or installment of principal
remain over due for a period of 90 days.
 Cash Credit/overdraft: Account remains out of
order for a period of 90 day.
 Bills Account: Bills purchased/discounted remain
overdue/ unpaid for a period of 90 days.
 Other Account: A/c Remains overdue for a period
of 90 days.

5. Term Loan: Interest and/or principal remains
over due for two harvesting seasons for short
duration crops.
Interest and/or principal remain overdue for
one harvesting season for long duration crops.
KCC: If account remains out of order for two
harvesting seasons in case of short duration
crops.
If account remains out of order for one
harvesting season in case of long duration
crops.

6. STANDARD: A loan Asset which does not pose any
threat to recovery.
SUB STANDARD: NPA up to 12 months.
DOBTFUL:
Doubtful - I : NPA up to 24 months
Doubtful - II : NPA up to 48 Months
Doubtful - III : NPA beyond 48 Months
Loss Assets : Loss has been identified by
Banks Internal/ external/ auditor/ RBI inspector.

7. willing to pay willing to pay
able to pay unable to pay
unwilling to pay unwilling to pay
able to pay unable to pay

8.  Lok Adalat
 Debt recovery Act Orissa and Bihar
 Money suit or Mortgage Suit.
 Debt Recovery Tribunal – 1993
 Securitization and Reconstruction of
Financial Assets and enforcement of
Security Interest. (SARFAESI) - 2002
 Sale of Financial Assets to Securitization/
Reconstruction Company.

9. Recovery of Debts Due to Banks
and Financial Institutions Act, was
passed by the Government of
India (Act 51 of 1993) for
expeditious adjudication and
recovery of debts due to banks
and financial institutions.

10.  The Debts Recovery Tribunal have been
constituted under Section 3 of the Recovery of
Debts Due to Banks and Financial Institutions
Act, 1993.
 Appointment of Presiding Officer (PO) and
Recovery officer. (RO)
 Setting of DRT Offices.

11. Authority :
• Secured Loan
• 10 lac and above
• To Auction Defaulters Property Charged to Bank.
• To hear Appeal against SARFAESIA.
STRUCTURE
Presiding officer
 High court Judge or Officer of General Manager Rankwith
Legal Background.
RECOVERY OFFICER
Chief Manager of sponsored Bank

12.  DEMAND NOTICE
 Valuation
 Possession
 Auction
 For unsecured portion - regular court
 For Appeal DRAT.

13.  The Securitisation and Reconstruction of
Financial Assets and Enforcement of Security
Interest Act, 2002 (SARFAESI) Empowers
Banks and Financial Institutions to recover
their non performing assets without the
intervention of the Court.
 The provisions of this Act are applicable only
for NPA loans with outstanding above Rs.1.00
lac. NPA loan accounts where the amount is
less than 20% of the principal and interest
are not eligible to be dealt with under this Act.

14.  The Act has made provisions for registration
and regulation of Securitisation companies or
Reconstruction Companies by the RBI, to
facilitate securitisation of financial assets of
banks, empower SCs/ARCs to raise funds by
issuing security receipts to qualified
institutional buyers (QIBs), empowering banks
and FIs to take possession of securities given
for financial assistance and sell or lease the
same to take over management in the event of
default

15.  To issue demand notice to the defaulting
borrower and guarantor, calling upon them
to discharge their dues in full within 60
days.
 To give notice to any person who has
acquired any of the secured assets to
surrender the same to the Bank.
 To ask any debtor of the borrower to pay
any sum due or becoming due to the
borrower.

16.  If the borrower fails to comply with the
notice, the Bank may take recourse to one
or more of the following measures:
 Take possession of the security
 Sale or lease or assign the right over the
security
 Manage the same or appoint any person to
manage the same

17.  Appointment of Authorized person.
 Recall of loan 30 days notice
 The bank or financial institution may, if it
considers appropriate, give a notice of
acquisition of financial assets. 60 days.
 Possession – Immovable Assets, Movable
Assets. – Normally 30 days
time to file objections.
 Auction of the property.

18.  There are many Assets reconstruction
Companies to whom Bank Sale its NPA
Assets for which SARFAESI Act has spelt out
the detail procedure. Some of them are
 Assets care and Reconstruction
enterprises.(ACRE)
 ARCIL
 Pridhvi Asset Reconstruction and
Securitisation Company Limited (PARAS)

19. THANK YOU