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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.

Collaboration:
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: Strategies for Silence Customers:
    - For these customers “Less is more”. They should be left with the payment plans with least of follow up from the agents’ side. Collection calls & regular follow-ups with customer may upset the customer and upset the repayment rhythm. However the continuous assessment must take place and if the commitments are not being met then this strategy has to be replaced with two Face attack.
    - Occasional meetings / phone calls may suffice as customer’s commitment here.
    - Option to move the customer from Silence to Collaborative quadrant should be explored.
    - Legal proceedings should be kept at minimal as the same can upset the repayment activities of customer as such customer can quickly go on bad note with the bank.

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