Npa and Its Recovery Measures
The magnitude of NPAs have a direct impact on banks profitability as legally they are not allowed to book income on such accounts and at the same time banks are forced to make provision on such assets as per the RBI guidelines. The Indian Banking sector is facing a serious situation in view of the Mounting NPAs which are the tune of Rs.56,000 crores in March 2002.NPAs is an important parameter in the analysis of financial performance of banks. The reduction of NPAs is necessary to improve profitability of the banks and comply with capital adequacy norms.
Therefore, to solve the problems of existing NPAs, quality of appraisal supervision and follow up should be improved. The NPAs can be avoided at the initial stage of credit consideration by putting rigorous and appropriate credit appraisal mechanism. This is in order to recover the NPA debt, the judicial systems should revamped and is essential to enforce the SARFAESI Act with more stringent provisions to realize the securities and personal assets of the defaulters
Major steps taken to solve the problems of Non-Performing Assets in India :-
1. Debt Recovery Tribunals (DRTs)
Narasimham Committee Report I (1991) recommended the setting up of Special Tribunals to reduce the time required for settling cases. Accepting the recommendations, Debt Recovery Tribunals (DRTs) were established. There are 22 DRTs and 5 Debt Recovery Appellate Tribunals. This is insufficient to solve the problem all over the country (India).
2. Securitisation Act 2002
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 is popularly known as Securitisation Act. This act enables the banks to issue notices to defaulters who have to pay the debts within 60 days. Once the notice is issued the borrower cannot sell or dispose the assets without the consent of the lender. The Securitisation Act further empowers the banks to take over the possession of the assets and management of the company. The
Therefore, to solve the problems of existing NPAs, quality of appraisal supervision and follow up should be improved. The NPAs can be avoided at the initial stage of credit consideration by putting rigorous and appropriate credit appraisal mechanism. This is in order to recover the NPA debt, the judicial systems should revamped and is essential to enforce the SARFAESI Act with more stringent provisions to realize the securities and personal assets of the defaulters
Major steps taken to solve the problems of Non-Performing Assets in India :-
1. Debt Recovery Tribunals (DRTs)
Narasimham Committee Report I (1991) recommended the setting up of Special Tribunals to reduce the time required for settling cases. Accepting the recommendations, Debt Recovery Tribunals (DRTs) were established. There are 22 DRTs and 5 Debt Recovery Appellate Tribunals. This is insufficient to solve the problem all over the country (India).
2. Securitisation Act 2002
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 is popularly known as Securitisation Act. This act enables the banks to issue notices to defaulters who have to pay the debts within 60 days. Once the notice is issued the borrower cannot sell or dispose the assets without the consent of the lender. The Securitisation Act further empowers the banks to take over the possession of the assets and management of the company. The