TED Conversations

Manish Gadia

Vice President,

This conversation is closed.

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....


Showing single comment thread. View the full conversation.

  • thumb
    Dec 1 2011: Two Face Attack Strategies:
    - There should be two points of contacts from the lending institution for the defaulted customer, either two individuals or two separate teams. One of the individual / team should approach the customer with the aim to understand all latest developments and how it may affect the repayments. Efforts should be put to ensure customer commits repayments of loans by specifying some dates where in part/full payments can be given to the lending institution. All these insights of the customer are shared with second agent/team, who would be working in conjunction. This second person/team would be working to push the customer in meeting the commitments. Without the necessary push, these type of customers would have tendency to take leeway and dishonour dates of repayments.
    - The second team / individual would play an important part in the whole process by ensuring regular meetings with the customer are conducted. Activities of meeting customer and constantly being in touch will increase many folds when the commitment dates are near. This team may take help of external collection agents who are specialists in follow-ups.
    - Whilst the first individual / team are seen in positive angle by the customer, the second one will not share the same place. However both faces would be required to complete the recovery process together. Both individuals / teams will have to work on-going basis whereby one person/team makes the customer to commit while other will ensure that commitments are kept. Care should also be taken that customer puts in writing all the commitments.
    - Parallel to influencing the customer for new payments, the first agent should also try to ascertain new ways to collaborate with the customers. The proposals forwarded should pose win-win solution for both the party. This would shift the customer to the first quadrant i.e. Collaboration and thus simplifying the whole process.
    - Recovery process here may take a long time but continuity is t

Showing single comment thread. View the full conversation.