After declaring asset as an NPA

♤ A comprehensive framework by RBI - The Reserve Bank of India had released a comprehensive ‘Framework for Revitalising Distressed Assets in the Economy’. The Framework outlines a corrective action plan which includes:

o early identification of problem cases,

o timely restructuring of accounts which are considered to be viable, and

o taking prompt steps by banks for recovery or sale of unviable accounts.

♤ Revival of the viable entities - timely support through restructuring in genuine cases is called for with the objective to preserve the economic value of viable entities and minimise the losses to the creditors and other stakeholders.

♤ Debt Recovery Tribunals – To recover security interest fastly, these tribunals along with appellate tribunal were established.

♤ Invoking legal provisions - The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act has provisions for the banks to take legal recourse to recover their dues.

♤ Selling the NPAs to SCs/RCs (securitisation companies/ reconstruction companies) registered under the SARFAESI Act. SCs/RCs are expected to do a specialised task of recovering and reconstructing the NPAs thereby reducing the NPAs in the system. Only a few out of 15 registered SCs seem to be successful.

♤ JLF (joint lenders’ forum): To build incentives and disincentives. Borrowers and lenders have to reach a conclusion about the prompt corrective action plan. After the conversion, all lenders under the JLF must collectively hold 51% or more of the equity shares issued by the company

♤ Lok Adalats: Lok Adalat mechanism offers expeditious, in-expensive and mutually acceptable way of settlement of disputes. Government has advised the public sector banks to utilize this mechanism to its fullest potential for recovery in Non-performing Assets (NPAs) cases.