NPA management – Banking School

Guidelines for Ethical Engagement of Direct Recovery Agents by Banks and Financial Institutions

NPA managementBy Surendra Naik May 24, 2025

IntroductionThe engagement of direct recovery agents by banks and financial institutions necessitates a careful balance between effective debt recovery and the protection of borrowers’ rights. To ensure that recovery practices remain fair, transparent, and respectful, institutions must adhere to regulatory guidelines and ethical standards. Key Considerations in Engaging Recovery Agents 1. Due Diligence Prior to…

SARFAESI Act, 2002: Applicability, Objectives, and Process of NPA Recovery

NPA managementBy Surendra Naik May 24, 2025

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), is a landmark legislation enacted to empower banks and financial institutions with the ability to recover non-performing assets (NPAs) without the need for court intervention. The Act was later amended by the Enforcement of Security Interest and Recovery of…

Debt recovery through DRT proceedings

Legal and Regulatory aspects of banking, NPA managementBy Surendra Naik May 24, 2025 12 Comments

The Debts Recovery Tribunals (DRTs) and Debts Recovery Appellate Tribunals (DRATs) were established under the Recovery of Debts and Bankruptcy Act (RDB Act), 1993 with the specific objective of providing expeditious adjudication and recovery of debts due to Banks and Financial Institutions. At present, 39 Debts Recovery Tribunals (DRTs) and 5 Debts Recovery Appellate Tribunals…

Leveraging Lok Adalats for Pre-Litigation Debt Recovery

NPA managementBy Surendra Naik May 24, 2025 60 Comments

LOK ADALAT have statutory status under the Legal Services Authorities Act, 1987 and have powers similar to those vested in a civil court. All awards are binding on all parties and can not be appealed. According to RBI guidelines, banks can use cases with a monetary value between ₹5 lakhs and ₹20 lakhs to Lok…

Ethical Loan Recovery Policies in Banking

NPA managementBy Surendra Naik May 23, 2025

IntroductionIn India, loan recovery is a critical function of banks and financial institutions, aimed at managing and reducing non-performing assets (NPAs). The Reserve Bank of India (RBI) provides comprehensive guidelines that emphasize ethical practices, borrower protection, and transparency in the recovery process. This article explores the key elements of the recovery policy followed by Indian…

Loan Default and Rescheduling in Retail Lending: Implications and Strategies

NPA managementBy Surendra Naik May 22, 2025

IntroductionIn the retail lending landscape, timely repayment of loans is essential for maintaining the financial health of both borrowers and lenders. However, due to various unforeseen circumstances, borrowers may sometimes fail to meet their repayment obligations. This article explores the concept of loan default, its consequences, and how loan rescheduling can serve as a preventive…

Definition of NPA and Asset Classifications of irregular loans

NPA managementBy Surendra Naik May 22, 2025 7 Comments

(This article explains the definition of non-performing assets (NPAs), classification of assets, Income recognition, and provisioning requirement under prudential norms for all types of accounts including NPA norms for Agricultural loans and especially KCC) Internationally income from Non-Performing Assets (NPAs) is not recognized on an accrual basis but is booked as income only when it…

What is Corporate Debt Restructuring (“CDR”) Scheme

NPA management, PPBBy Surendra Naik October 15, 2024

Corporate Debt Restructuring (“CDR”) is typically a voluntary framework, under which financial institutions and banks restructure the debt of companies facing financial difficulties due to various factors, to provide support at the right time for such businesses. It helps a company in financial distress realign its obligations and restore liquidity, avoid bankruptcy, and stay in…

Does RBI circular dilute the penal measures on borrowers classified as wilful defaulter or fraud?

NPA managementBy Surendra Naik June 20, 2023

In view of Bank unions AIBOC and AIBEA have opposed the Reserve Bank’s move to allow lenders to settle loans of wilful defaulters under compromise settlement, the central bank in a follow-up on Monday issued FAQs (Frequently Asked Questions) related to its June 8 circular. RBI denied that it has introduced a new clause permitting…

What is Technical write-off, is it a normal banking practice?

NPA managementBy Surendra Naik June 20, 2023

Regulated Entities like banks and NBFCs may undertake technical write-offs in loan accounts that are either considered unrecoverable or whose recovery is likely to consume disproportionate resources of the lenders. The board approval will be required for compromise settlements or technical write-offs for accounts categorised as wilful defaulters or fraud. As for technical or prudential…

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