There have been several debates on the how to tackle NPAs and the role of banks in controlling them. Regulatory bodies have noticed a spike in NPA since 2008 and have introduced enough measures for managing NPAs. However, does this really mean that the recovery of bad loans is happening as expected? No!
These statistics prove that NPA recovery over the years is only worsening with time.
In September 2016, the bad loans have almost doubled within the last 12 months i.e. from Rs. 3, 40,556 crores in Sep 2015 to Rs. 6, 68,825 crores in Sep 2016. According to a few bank sources, the recovery of non-performing assets can further be affected by recent episodes like demonetization, PNB scam and the like.
According to Care Ratings, “As the economy recovers, the NPA levels will come down. We believe that the system has better recognition norms today which is comforting.” But, when will our economy strengthen in real terms and the NPA be dealt with in an efficient manner?
After the introduction of Insolvency and Bankruptcy Code in 2016 (which is still being amended for attaining desired results), banks are relying on it heavily to effectively recover bad loans. It is expected that upon successful implementation of this code, the banks will be able to release over 25,000 crores of capital in the coming 4 to 5 years, which is presently sealed as non-performing assets. Also, banks may succeed in attaining an NPA recovery rate of 32%.
Few of the other NPA recovery tools that banks may utilise are:
- Through Debt Recovery Tribunals (DRT)
- Through Lok Adalats
- Through legal proceedings as under the SARFAESI Act, 2002.
NPA and recovery management is critical to banks as the recovered currencies can then be reinvested or lend further, thereby maximising the banks’ earnings. Hence, banks can strengthen their working capital, capitalise on the net profit and improve efficiency.
Banks can invest in NPA management software to better manage their bad loans and recover dues. A well-suited solution can help banks in making effective lending decisions and follow an organised approach for recovering loans.
Sesame’s NPA management and recovery tool is meant to serve banks with a systematic, one-stop solution that comes with an analytical workbench, contact system and recovery options to deal with NPAs and bad loans. It is an add-on to bank’s existing core banking solutions and can easily integrate with banks’ customer data. Its intelligent systems can identify risks on time and help banks take proactive actions against NPAs or assets that are on the verge of delinquency. For more details, schedule a demo today and check out the software capabilities in action.