Npa Managment2

download Npa Managment2

of 30

  • date post

    14-Apr-2018
  • Category

    Documents

  • view

    223
  • download

    0

Embed Size (px)

Transcript of Npa Managment2

  • 7/29/2019 Npa Managment2

    1/30

    1

    PRESENTED BY CM & ARD DEPARTMENT

    9/15/2013

  • 7/29/2019 Npa Managment2

    2/30

    MANAGEMENT OFNON-PERFORMING ASSETS

    PRESENTATION BY

    CM & ARD DEPARTMENT

    HO LUCKNOW

  • 7/29/2019 Npa Managment2

    3/30

    RBI GUIDELINE AS PER MASTER

    CIRCULAR

    1- In line with the international practices and as per

    the recommendations made by the Committee on

    the Financial System (Chairman Shri M.

    Narasimham), the Reserve Bank of India has

    introduced, in a phased manner, prudential norms

    for income recognition, asset classification and

    provisioning for the advances portfolio of the banks

    so as to move towards greater consistency andtransparency in the published accounts.

    3

    PRESENTED BY CM & ARD DEPARTMENT

    9/15/2013

  • 7/29/2019 Npa Managment2

    4/30

    RBI GUIDELINE AS PER MASTER

    CIRCULAR

    2 -The policy of income recognition should be

    objective and based on record of recovery rather

    than on any subjective considerations. Likewise,

    the classification of assets of banks has to be done

    on the basis of objective criteria which wouldensure a uniform and consistent application of the

    norms. Also, the provisioning should be made on

    the basis of the classification of assets based on

    the period for which the asset has remainednonperforming and the availability of security and

    the realisable value thereof.

    4

    PRESENTEDBYCM&ARDDEPA

    RTMENT

    9/15/2013

  • 7/29/2019 Npa Managment2

    5/30

    RBI GUIDELINE AS PER MASTER

    CIRCULAR

    3 Banks are urged to ensure that while granting

    loans and advances, realistic repayment schedules

    may be fixed on the basis of cash flows with

    borrowers. This would go a long way to facilitate

    prompt repayment by the borrowers and thusimprove the record of recovery in advances.

    5

    PRESENTEDBYCM&ARDDEPA

    RTMENT

    9/15/2013

  • 7/29/2019 Npa Managment2

    6/30

    DEFINITION OF NPA

    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 inrespect of a term loan,

    The account remains out oforder in respect of anoverdraft/ cash credit

    The bill remains overdue for a period of more than90 days in the case of bills purchased anddiscounted

    The installment or interest remains overdue for twocrop seasons in case of short duration crops andfor one crop season in case of long duration crops

    6

    PRESENTED BY CM & ARD DEPARTMENT9/15/2013

  • 7/29/2019 Npa Managment2

    7/30

    CATEGORIES OF NPA

    Substandard Assets Which has remained NPA for aperiod 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 bankor internal or external auditors or the RBI inspection butthe amount has not been written off wholly.

    7

    PRESENTED BY CM & ARD DEPARTMENT 9/15/2013

  • 7/29/2019 Npa Managment2

    8/30

    PROVISIONING NORMS

    8

    PRESENTED BY CM & ARD DEPARTMENT

    TYPE DETAIL REQUIRED %

    STD (AG & SME) 0.25

    (OTHER) 0.40

    (PERS.LOAN) 1.00

    SUB STD SECURED 10.00

    UNSECURED 20.00

    BD1 SECURED PART 20.00

    UNSECURED PART 100.00

    BD2 SECURED PART 30.00UNSECURED PART 100.00

    BD3 & LOSS SECURED PART 100.00

    UNSECURED PART 100.00

    9/15/2013

  • 7/29/2019 Npa Managment2

    9/30

    FACTORS CONTRIBUTING TO NPASPoor Credit discipline Inadequate Credit & Risk Management

    Diversion of funds by promoters

    Funding of non-viable projects

    In the early 1990s PSBs started suffering fromacute capital inadequacy and lower/ negativeprofitability. The parameters set for theirfunctioning did not project the paramount need forthese corporate goals.

    The banks had little freedom to price products,cater products to chosen segments or invest fundsin their best interest

    9

    PRESENTED BY CM & ARD DEPARTMENT9/15/2013

  • 7/29/2019 Npa Managment2

    10/30

    FACTORS CONTRIBUTING TO NPAS

    Inadequate mechanism to gather and disseminatecredit information amongst commercial banks

    Effective recovery from defaulting and overdue

    borrowers was hampered on account of sizeableoverhang component arising from infirmities in theexisting process of debt recovery, inadequate legalprovisions on foreclosure and bankruptcy and

    difficulties in the execution of court decrees.

    10

    PRESENTED BY CM & ARD DEPARTMENT 9/15/2013

  • 7/29/2019 Npa Managment2

    11/30

    CURRENT STATUS OF NPAS

    11

    PRESENTED BY CM & ARD DEPARTMENT

    REGION

    Unnao

    BARABANKI

    Lucknow

    Farrukhabad

    Kannauj

    Hardoi

    Mainpuri

    TOTAL

    AligarhAgra

    Etah

    Hathras

    TOTAL

    GRAND TOTAL

    NPA AS ON 15-06-2013

    Amt

    18269.09

    17007.61

    13081.70

    9439.99

    9405.28

    14636.04

    4520.04

    86359.75

    7482.88

    3837.5

    5329.47

    2329.56

    18979.41

    105339.16

    NPA % to o/s

    %

    42.62

    26.98

    28.30

    23.83

    32.83

    35.47

    16.06

    29.80

    8.26

    8.65

    9.84

    6.44

    8.42

    20.45

    9/15/2013

  • 7/29/2019 Npa Managment2

    12/30

    SLIPPAGE... .. .

    12

    PRESENTEDBYCM&ARDDEPA

    RTMENT

    9/15/2013

  • 7/29/2019 Npa Managment2

    13/30

    IMPACT OF NPAS ON OPERATIONS

    Drain on Profitability

    Impact on capital adequacy

    Adverse effect on credit growth as the bankers

    prime focus becomes zero percent risk and asa result turn lukewarm to fresh credit.

    Excessive focus on Credit Risk Management

    High cost of funds due to NPAs

    13

    PRESENTED BY CM & ARD DEPARTMENT9/15/2013

  • 7/29/2019 Npa Managment2

    14/30

    NPA MANAGEMENT PREVENTIVE MEASURES

    Formation of the Credit Information Bureau(India) Limited (CIBIL)

    Release of Wilful Defaulters List. RBI alsoreleases a list of borrowers with aggregateoutstanding of Rs.1 crore and above against

    whom banks have filed suits for recovery oftheir funds

    Reporting of Frauds to RBINorms of Lenders Liability framing of Fair

    Practices Code with regard to lenders liabilityto be followed by banks, which indirectlyprevents accounts turning into NPAs onaccount ofbanks own failure

    14

    PRESENTED BY CM & ARD DEPARTMENT

    9/15/2013

  • 7/29/2019 Npa Managment2

    15/30

    NPA MANAGEMENT PREVENTIVE MEASURESRisk assessment and Risk managementRBI has advised banks to examine all cases of

    wilful default of Rs.1 crore and above and filesuits in such cases. Board of Directors arerequired to review NPA accounts of Rs.1 croreand above with special reference to fixing of

    staff accountability.Reporting quick mortality casesSpecial mention accounts for early

    identification of bad debts. Loans andadvances overdue for less than one and two

    quarters would come under this category.However, these accounts do not needprovisioning

    15

    PRESENTED BY CM & ARD DEPARTMENT

    9/15/2013

  • 7/29/2019 Npa Managment2

    16/30

    NPA MANAGEMENT - RESOLUTION

    Compromise Settlement Schemes/SANCHETNA Restructuring / Reschedulement

    Lok Adalat

    Debt Recovery Tribunal (DRT)

    Proceedings under the Code of Civil Procedure Sale of NPA to other banks

    Sale of NPA to ARC/ SC under Securitization andReconstruction of Financial Assets and Enforcementof Security Interest Act 2002 (SARFAESI)

    WRITTEN OFF

    16

    PRESENTED BY CM & ARD DEPARTMENT

    9/15/2013

  • 7/29/2019 Npa Managment2

    17/30

    COMPROMISE SETTLEMENT SCHEMES

    WHY ?.... MONEY HAS TIME VALUE

    MONEY LOCKED IN NPA A/CS FLOWS BACK IN

    TO MAIN STREAM WE ARE HELPING THE REAL NEEDY PERSONS

    WHO OTHER WISE WILL NOT BE IN A POSITION

    TO CLOSE THE ACCOUNT

    17

    PRESENTED BY CM & ARD DEPARTMENT

    9/15/2013

  • 7/29/2019 Npa Managment2

    18/30

    LOK ADALATSSmall NPAs up to Rs.20 LacsSpeedy Recovery

    Veil of Authority

    Soft DefaultersLess expensive

    Easier way to resolve

    18

    PRESENTE

    DBYCM&ARDDEPA

    RTMENT

    9/15/2013

  • 7/29/2019 Npa Managment2

    19/30

    DRT ACT The banks and FIs can enforce their securities by initiating

    recovery proceeding under the Recovery if Debts due toBanks and FI act, 1993 (DRT Act) by filing an applicationfor recovery of dues before the Debt Recovery Tribunalconstituted under the Act.

    On adjudication, a recovery certificate is issued and thesale 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 theproperties charged to creditor and to pass attachmentorders in respect of charged properties

    In case of non-realization of the decreed amount by way ofsale of the charged properties, the personal properties ifthe guarantors can also be attached and sold.

    However, realization is usually time-consuming Steps have been taken to create additional benches

    19

    PRESENTED BY CM & ARD DEPARTMENT9/15/2013

  • 7/29/2019 Npa Managment2

    20/30

    PROCEEDINGUNDER CODEOF CIVIL PROCEDURE For claims below Rs.10 lacs, the banks and FIs can initiate