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Manish Gadia

Vice President,

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Non Performing Assets (NPA) Recovery Grid

In cluttered economy of current times, Banks had a tough task of reducing / recovering the current NPA levels and at the same time address the increasing flow of good credit becoming bad. It's a general trend that rate of default is higher than resolution rate of NPA in times of financial downturn (Resolution of NPA means an exit from the asset through total or partial recovery of NPA, with or without external assistance from Asset Reconstruction Companies (ARCs), Debt Recovery Tribunal (DRT), Corporate Debt Restructuring (CDR) or other legal proceedings) In such demanding conditions, lending institutions must be equipped with more and more of expertise in recovery. The conventional methodologies in recovery need to be complemented with strategies which could be even standardised for the lending institution. Here we propose a grid which can be well used as a protocol to be followed for NPA resolution. The trigger points of NPA have been distinctly categorized with cause & effect. Lending Institutions can use this as a necessary checklist to avoid substandard loans. The focus of this IDEA is not to clean the books by divestiture or swap of NPAs, but to recover the NPAs.

The Grid - A 2 X 2 Matrix with Co-operation from Customer on X Axis and Commitment from Customer on Y Axis. Quadrant 1 to be Collaboration Strategy. Quadrant 2 to be Silence Strategy. Quadrant 3 to be DEAD strategy and 4 to be 2 Face Attack.

The set of customers, who are willing to collaborate with the bank are positioned in the first quadrant. They are high on co-operation as well as commitment.

2 Face Attack
There are many customers who appropriately entertain all calls from the agents and keep up to all the meetings to discuss recoveries. They are cooperative in talking to lending institutions. But they don’t honour most of their commitments of repayments.

Another 2 Strategies to be communicated below....


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    Dec 1 2011: Silence:
    There are yet another group of customers who feel uncomfortable with the phone calls and meeting recovery agents/ bank employees. They certainly don’t believe in collaborating with the bank and request a “Do Not Disturb” from bank side. However they keep their commitments and make the payments on date, as per mutually agreed plans. Just like collaborative customers they accept their liabilities and will be willing to go extra mile to pay off their debts.

    A customer with no co-operation with recovery agents and also giving no commitment for repayments are placed in this quadrant. A defaulting customer should only be pronounced dead for recovery after considerable amount of time & effort has been spent towards the same. When all efforts of transferring the defaulting customer to any of other quadrants fail, the customer may be put under this category. Usually intentional fraudsters lie in this category. The promoters may have no intention to carry on operations of the company going ahead. Sometimes the lending institution may even have to trace the missing promoters altogether. Business associates of defaulter lying in dead category may deny links with the defaulter to protect themselves. A default company lying in this category may have defaulted with multiple lending institutions.

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