nonperforming-asset oberoi sir

8/2/2019 Nonperforming-Asset Oberoi Sir...

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PRESENTED BY:

SONALI PADAVE

CHAITRALI THAKUR 36

ANISHA PHUTANE

[email protected]

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NPA (NON PERFORMING ASSET)

Non Performing Asset means a loan or anaccount of borrower, which has beenclassified by a bank or financial institution assub-standard, doubtful or loss asset, inaccordance with the directions or guidelinesrelating to asset classification issued by RBI.

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INTRODUCTION TO NPA

Earlier assets were declared as NPA aftercompletion of the period for the payment oftotal amount of loan and 30 days grace.

In present scenario assets are declared asNPA if none of the installment is paid till 180days i.e. six months in respect of a termloan.

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CONT..

With effect form March 31, 2004, a non-performing asset (NPA)shell be a loan or an advance where;

interest and /or installment of principal remain overdue for aperiod of more than 90 days in respect of a Term Loan,

the account remains 'out of order' for a period of more than 90

days, in respect of an overdraft/ cash Credit(OD/CC),

the bill remains overdue for a period of more than 90 days inthe case of bills purchased and discounted,

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CONT..

interest and/ or installment of principalremains overdue for two harvest seasons butfor a period not exceeding two half years in

the case of an advance granted foragricultural purpose, and

any amount to be received remains overduefor a period of more than 90 days in respectof other accounts.

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TYPES OF NPA

There are three major types of NPA:Sub-standard : The account holder comesin this category when they dont pay threeinstallment continuously after 90 days andupto 1year. for this category bank has made10% provision of funds from their profit tomeet the losses generated from NPA.

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CONT..

Doubtful NPA : under doubtful NPA thereare three sub categories :

D1 i.e. up to 1 year : 20% provision is made by the

banksD2 i.e. up to 2 year: 30% provision is made by the bankD3 i.e. up to 3 year : 100% provision is made by thebank.

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CONT..

Loss Assets : under this 100% provision ismade. When account holder comes in thiscategory their account can be written off bythe banks.

After this the assets are handed over torecovery agents for sale

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REASONS BEHIND NPA

Lack of proper pre-enquiry by the bank forsanctioning a loan to a customer.Non performance of the business or thepurpose for which the customer has takenthe loan.Willful defaulter.Loans sanctioned for agriculture purposes.Change in govt. policies leads to NPA.

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EFFECTS OF NPA ON BANKS & FI

Restriction on flow of cash done by bank dueto the provisions of fund made against NPA.Drain of profit.Bad effect on goodwill.bad effect on equity value.

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NET NON PERFORMING ASSETS

YEARS SBI PNB ICICI UTI SCB1996 7.31 10.21 3.69 5.33 3.301997 7.30 10.38 3.22 3.66 2.88

1998 6.07 9.57 1.14 5.63 2.421999 7.33 8.96 2.88 6.32 NA2000 6.65 8.52 1.53 4.71 2.042001 5.33 6.69 3.36 2.39 1.532002 5.63 5.32 5.48 3.46 3.462003 4.5 3.86 5.21 2.39 2.392004 3.48 0.98 2.21 1.29 1.292005 2.65 0.2 1.65 1.39 1.392006 1.87 0.29 0.72 0.98 0.98

2007 1.32 0.28 0.78 0.72 0.87 12


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SARFAESI ACT, 2002

The Securitisation and Reconstruction ofFinancial Assets and Enforcement ofSecurity Interest Act, 2002 empowers Banks

/ Financial Institutions to recover their non-performing assets without the intervention ofthe Court.

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CONT..

The Act provides three alternative methodsfor recovery of non-performing assets,namely: -SecuritisationAsset ReconstructionEnforcement of Security without theintervention of the Court.

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CONT..

The provisions of this Act are applicable onlyfor NPA loans with outstanding above Rs.1.00 lac.NPA loan accounts where the amount is lessthan 20% of the principal and interest are noteligible to be dealt with under this Act

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DEBT RECOVERY TRIBUNAL

It is the special court established bycentral government for the purpose ofbank or any financial institutions recovery.The judges of this court are the retired

judges of high court.In this court only the recovery cases of 10lakhs and above can be filed.

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SARC

Banks have a specific cell for NPA, which iscalled as Stress Asset Recovery Cell.This cell continuously works on How

Recoveries Can Be Done. Bank does its recovery by sending notices,

by bidding, and by taking a legal action.

DECREE is a paper of court or thepermission given by the court to sell theland or any asset.

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SPECIAL MENTION ACCOUNT

This is the account which is made beforeNPA.When a customers account comes under this account then immediate follow up isdone by the respective bank.Warning signals are given by the bank.

(when a bank has a doubt on a customeralthough they have standard accounts, srstock statement etc)

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RECALLED ASSETS

When bank has a doubt on the intension ofthe customer it ask for the whole money tobe paid back even, if he has not paid two orthree installments.Notices are sent to the customer.On recalled assets bank can take legalaction also.

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AGENTS APPOINTED FOR RECOVERY

Recovery agent : they are agents hired by thebanks for the recovery of the non-performingassets at 10% commission.Enforcement agent: they are the agents hiredby the bank after filing the case in court. Theyare hired under SARFAESI act at 10%commission.

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CONT..

Self help group(SHG): SHG is a group of 10to 15 people in rural areas which isappointed by the banks especially SBI asrecovery agent for govt. sponsered schemelike PMRY etc.

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ARC

The Asset Reconstruction CompanyLimited(ARCIL),Indias first ARC with an initial equity of Rs.10crore with ICICI bank, IDBI and SBI to pickup 24.5% stake each(and remaining to beacquired by HDFC, IDBI Bank and UTIBank).The second asset reconstruction company(ARC), ASREC (India) in the country is set to

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nonperforming-asset oberoi sir

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