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Loan Recovery Process Seminar for MBA Students

The banks should take certain measures in reducing the problem of the Non-performing measure such as conducting recovery camps, the debt recovery, the adjustment of the loan rates, the interest free credits as well as the genuine credit check. Among all these measure the most effective measure which had some what reduced the problem of the Non-performing assets are the debt recovery tribunals as well as the recovery camps which are conducted by the banks.

Recovery Camps held by the banks

The banks and financial institutions should conduct some recovery camps in order to overcome the problem of the non performing assets as well as to recover the pending loans from the borrowers. This recovery camps should in each and every place where there is a problem of the non-performing assets. This recovery camp should be designed with an efficient plan and should include the entire aspects related to the banks and financial institutions. The banks and financial institutions should be able to explain the actual problem of the non performing asset to the customers.

The banks should explain the procedure and steps before and after getting the loans. They should make the customers to clearly understand the problem of the non performing assets in such a way that if they do not pay the loan amount in time, it will affect the economical status of the bank and they cannot even grant the loans to the other customers who are in need and they should understand that if others doesn’t pay the loan amount in time they would have not get the loan amount.

The special type of awareness should be created to the customers so that they should be able to understand the total problem of the non-performing assets. In this camp the banks and the other financial institutions should even specify the acts related to the banks such as the securitization and reconstruction of the financial assets as well as the enforcement of the security interest act 2002. And should mention the principles of the legal actions which are been taken on the customers after getting the alert notice from the banks and the financial institutions. They should even clearly explain the recovery process of their banks and the financial institutions and should mention the actions and activities of the recovery agents which are taken on the customers.

Totally the recovery camps should be capable of creating the efficient awareness to the customers about loan procedure within the banks and financial institutions. 

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Best Topic Seminar MBA on Monitoring Practices and Monitoring Systems

The monitoring practices and monitoring systems process is nothing but the effective recovery management.

Recovery Management

The Indian banks have not considered the recovery of the loans as the serious issue which leads to the reduction of the NPAs-non-performing assets. The banks should notice that the recovery management of the old and the new loans is one of the essential factors of the Non-performing assets management.

This specific management process must be started within the initial stage of the loan it self and the banks should clearly explain this process to the borrowers before allotting the loans. The effective management of the recovery of the NPAs will have two strategies such as the arresting of the defaults and formation of the non-performing asset, while the second one is the handling of the loan delinquencies. 

The individual banks will appoint their own recovery staff in order to process their recovery procedure. The recovery management system is been designed with specific strategies in order to fulfill all the objectives of the banks. By making use of this particular recovery system the banks will be able to recover their pending credits and loans without losing their customers. There are some advantages as well as disadvantages in this recovery process:

Advantages:                           

  • By assigning or allotting the debt or loan recovery process to the outsiders it will allow the officials from the banks to improve or develop more and more effective new businesses
  • Within this recovery process because of the third party involvement will save more and more time and will improve or enhance the chances to recover the due payments and this recovery persons are the specialists in dealing with the typical customers and by using this type of people the banks can usually recollect their pending debts in time
  • The efficient data collection process may save the cost of the legal proceedings

Disadvantages:

  • The debt collection process is cost effective
  • This agency will play the major role in establishing the relationship or communication source between the banks and the customers, if these agents deal in a rude manner with the customers then it may affect the relationship between the banks and the borrowers. So the bank should maintain certain measures and allot some principles to the recovery agents within the process of recovery process.
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Effective Debt Collection Practices MBA Reference Material

The effective collection practices are nothing but a process of recovery of the loan amount from the borrowers. Within the entire loan process period if the borrower is not paying the loan amount in time which means overdue of payments, then the banks are having different types of collection procedures in order to recover their loan amount form the borrower.

The recovery process varies from the bank to bank. Some of the banks will make use of the preliminary acts and authorities on the borrowers by sending them default notices in order to recover their loan amount, whereas some of the banks will use their self acts and norms of their banks such as they will appoint the special recovery agents to recover the allotted amount from the customers.

This is having positive as well as negative impact on the customers as some of the customers will pay their dues if the recovery agents visit their place, but some of the customers will not even consider the actions of the recovery agents, at this particular time the banks should make use of the existing preliminary acts in order to recollect their money from the borrowers. 

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Impact on Non Performing Assets Commercial Banks

Introduction to Impact on Non Performing Assets Commercial Banks:

Public and private sector banks profitability, liquidity and also competitive functioning are been affected by the non performing assets and as a result the psychology of the bankers will also affected by NPAs who are depositing towards the credits as well as in the expansion of credits.

The Non-performing assets Impact on profitability

Commercial banks from the year 1993 to 2001 have been incurring an entire amount of Rs. 31251 crores towards provisioning non performing assets. By incurring this amount the net non performing assets brought up by Rs. 32632 crore or in the other words it 6.2 percent net advances. The huge provision of NPAs combined by grasping cost of those assets of non productive is performed from so many years and has a severe drain on the profitability of PSBs.  In the issues of the nationalized banks regarding equity have been already strikes on the market and in the secondary market are now quoted at the discount. As a substitute this has been forced PSBs to have a loan seriously from the market of debt to built Teir II capital in order to meet rule of the capital adequacy by keeping serious pressure up on the restrictions of their profits (Amaresh Samantaraya, 2007).

The Impact of the Non-performing assets on the outlook of Bankers towards Credit Delivery

In the psychology of the banks in now days is to keep themselves from the risk free operation i.e. zero percentage of risk as well as to go towards the new credit. The credit growth of this type will affect adversely when these growth is compared to the deposits, this will finally result in the low ratio of C/D approximately in between 50% to 54% for the company.

It is obvious that the collateral security presence at the best might change the extension of the credit to productive sectors towards the investments of the real estate, but may not evade the account turning into NPA.  In future the blocked real estate and assets will correspond to the main NPA and illiquid security in this type of proceeds has the continuous inclination towards long period of time. Dead-line is achieved by the nationalized banks of the tunnel as well as their future affluence based up on the critical solution of this suspended threat (Arvind Virmani., 2005).

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The Legal remedies Indian Banks for MBA Students

Through the bank the Legal action is considered as final resort to improve debts. Actually in willful default cases, siphoning of funds and diversion legal actions were the final remedies (Sarat Chandra Dhal, 2003).

DTR (Debt Recovery Tribunals) Establishment in the Debts recovery because of 1993 Financial Institutions Act and the Banks.  Rs. 10 lakhs approaches for recovery and earlier banks can progress DTR. Debt Recovery Appellate Tribunal entertained that except debt at 75% in argument is deposited, no demand over DTR’s instructions is entertained.

Borrowers special investigate audits

The banks of a country must have the power in order to process the special investigation audit of capacity debtors. These debtors are those who drain off funds and make no fraud of banks.  This will be the measure for stream of debtors and improve the repayment methods for loans. These audits are very much useful in debtor’s investigation.

The Bench Marking

The concept of bench marking is very much required in several particular banking sectors. This will work with various parameters. There are different types of bench marking as internal, national and international wide. The practical experiences in private banking sectors will be taken as measures for the banks in people sector. Here the recognition of a bench mark will be of 90 days duration as the NPA is an international bench mark. This has been announced by RBI from March 31, 2004. NPA is an international bench mark which was recognized and prescribed (Mr. P.K. Kaul, 2008).

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Challenges of the Non-Performing Management

The NPAs management includes two concepts, which are Prevention and remedy.

Preventive Management:

This contains credit assessment and borrowers rating, earlier than loans commitment. The relationship manager and credit in the bank must be capable to involve on this. Though the information from records of internal or external from agencies such as Credit Information Bureaus (Limited) it is probable avoid likely NPAs.

Remedial Management:

There are various techniques in management to treat issues of NPAs (Pravakar Mohanty, 2006).

 NPAs Analysis by segments:

The NPAs required to be analyzed by the priority sector and non-priority sectors, large corporate, agriculture, retail borrowers, small industries industry-wise analysis and state-wise analysis. Research study of seven banks NPAs involved by Pricewaterhouse Cooper’s illustrates that NPAs 23% are in the sector of priority, If 77% of NPAs fit in to non-priority sector. The classification of industry recommended that, Iron and steel, Textiles, Engineering, Chemicals and metals of non-ferrous report for 55% of NPAs. Main part of the NPAs is before small borrowers are from the large borrowers. That analysis by every bank can help in managing NPAs and preventing loss of debt.

 Prevention of slippage

Assets of Standard performance should not be permitted to fall into NPAs. Work should be done to for NPAs up gradation into standard assets. 

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Impact of Non-Performing Assets on the Functioning Of Banks MBA Seminar Idea

The efficiency of any of the bank cannot be obtained only from the balance sheet size but also it is calculated by assets return level in the bank. For banks the NPAs will not create interest income but simultaneously banks are very much necessary in order to provide terms for NPAs with their profits that are existing in current. Being the NPAs have harmful impact on the arrival on assets are in this methods.

  • Banks interest income can fall down and accounted on the basis of receipt.
  • Profitability of Banks is caused harmfully due to offering of doubtful debts and ensuing contain it as terrible debts.
  • ROI (Return on investments) is decreased.
  • The adequacy ratios of capital are termed as NPAs and are following into its estimation.
  • Maximizes the capital price.
  • Variance of liability and assets will expand.
  • EVA (The economic value addition) by banks get trouble for the reason that EVA is similar to the profit of net functioning less capital cost and
  • It margins funds recycling.
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Factors for Non Performing Assets

Introduction to Factors for Non Performing Assets:

There are many factors that contribute to the non performing asset (NPA). Few of them are discussed below.

  • Distributing variety of funds in order to expand the business. Funds could also be distributed for expanding the modern techniques, for taking latest projects and also for helping in relevant considerations.
  • The factors such as time and investment should be considered during the implementation stage (Mr. P.K. Kaul, 2008).
  • Economic inequalities, short amount of power, increasing prices are some factors which makes more no of dues.
  • There are also some other factors like natural disasters, external links with other countries leads to permanent termination of non payment dues.
  • Failure condition of business, improper management, use of irrelevant technologies, technical and hardware problems in machinery.
  • Insufficient contracts with customers.
  • Modifications in government policies, controlling techniques for pollution, improper credit decision makings, adopting outdates systems, lending sectors in priority wise (Mandira Sarma, 2007).
  • Delay in releasing of funds and subsidies from the corresponding banks.
  • Tapping off the funds, frauds and arguments with managing directors.
  • No written policies for finalization and rehabilitation by BIFR. BIFR refers to the board of industrial and reconstruction.
  • No limitations for portfolio concentration and poor analysis and description of industry.
  • Crucial financial barriers and excessive trust on corresponding banks.
  • No divisions of assets and no standards of loan.
  • Lack of coordination between no of banks which are for commercial use, and misusing the funds (Kesar Dass B, 2003).
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Procedure for Granting Loans and Credits MBA Reference Material

The bank will issue the loans to the private as well as the legal individuals. The loan is the type of funds which are been offered by the banks with certain procedures of paying the money within a specific time. Firstly the customers need to submit their loan application to the particular bank which should include the entire details of the loan amount such as the required loan amount.

The purpose of applying the loan, the documents which are mentioned in the application checklist must be provided including the supportive collateral documents in order to prove the capability of the applicant to repay the loan amount.

The managers will provide the required assistance and support to understand the entire loan procedure to the customers and then they will cross check the entire documents provided by the customers particularly and then if all the documents are sufficient and supportive then the loan will be issued to the particular individual with an agreement copy which includes the payment modes and interest to be paid to the bank. 

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MBA Reference Material Criteria for Giving Credits and Its Required Qualifications

In order to obtain the credits in the form of loan there are four main criteria steps involved they are capital, capacity, character as well as collateral. The first three steps are related to the borrowers, whereas the final step is related to the evaluation of the property.

Capital

The capital is referred to as the aspect which is related to know whether the applicant is having the essential standards of paying the loan amount in time or not.
Capacity
The capacity is referred to as the aspect which is related to analyze whether the application is capable of repaying the loan amount.
Character
The capacity refers to analyze the capability of the individual in repaying his loan amount, whereas the character refers to analyze the past history of the individual in paying his previous loan credits.
Collateral
The collateral process is one of the significant aspects in getting the loan amount. The valuation of the capital, the capacity as well as the character is particular and related to the borrower. The collateral aspect is referred to as the process of analyzing the properties and guarantees of the applicant opting for the loan.

The requirements and qualification in order to obtain the loan from a bank differs from bank to bank and the type of loan. As there are different types of loans such as personal loans, home loans, mortgage loans, educational loans, car loans, business loans and many more. As the loans vary in their nature, the qualifications required to obtain them will even vary. There are general requirements to obtain the loans such as the individual profile of the applicant, documents related to the type of loans, the collateral properties documents, previous transactions within any type of bank, previous loans status etc.