Beruflich Dokumente
Kultur Dokumente
very
lops ided. The main reason for such an imbala nce d growth was
that the comme rc ia l banks were in the hands of t h e private
sector. As such, they provided short - term finance to trade and
industry based on the security offered by the borrowe rs. This
security - oriented approach resulte d in a large chunk of bank
credit being utilised only by
raders.
Banks
host
were
unknown
people
with
ins titutions
to
small
the
it
is
esse ntia l
to
the
necessary f
inancial resources.
For a t t aining the goal of self - suffic ie ncy and for
ensuring sus ta ine d economic growth, the All India
Rural
banking
Bank of
State
in
by
14
banks
control
in
introduce d.
1969
and
social
of
banks was
hitherto
small - scale
neglec te d
As these
ass istance,
sectors.
in
of the economy
advances
to
the
priority
sector.
Priority
sectors include agric ulture [ both direct and indirec t], small
scale indus trie s, small road and water t ra nsport,
business, retail t rade,
persons, s t a t e sponsore d
small
s elf- employed
for
sc hedule d
Initially, there were no targets f ixed on the priority sector l ending. I t was just emphas ize d
that
comme rc ia l
1974 , public
sector
banks
of
to 40
overall
At
the
32
per
cent
of
NBC
to be
32
revised
priority
the
- t argets
sector,
have
now
guidelin es
priority
been
sector
l inked
on
l ending
l ending
to adjusted
to the
t arget/ sub
net
bank
w hic he ver
April 30 , 2007 .
During
the initial
period,
only
agric ulture,
smallartisans
on
the
of
the
Narasimham
sector.
relating
to priority
sector
l ending,
the
most
Thus,
the
the
coverage
was
not
expanded
reduced
to
but
include
the
more
of
priority
t arget
of
definition
of
sectors
l ike
was
made such that, banks that cannot meet the priority sector
t argets can deposit funds in the f inancial institutions l ike
National
Bank
for
A gric ulture
and
Rural
Development
Industries
sectors.
sector
for
a l l
includes
short
directly
to
individua l
and
farmer s ,
medium
a l l i ed
self- help
f i rms
and
ins titutions)
up
to
Rs.
20
l akh
f inance
to small
scale
industries
( SSIs)
are
or
prese rvation
in plant
and
of
goods
machinery
and
( original
scale
indus trie s
or
are u nits
engaged
prese rvation
of
in
goods
the
and
scale
units
whose
inves tme nt
in
plant
and
advances granted
to units
of
in the
ope ra tions,
KVI
s ector,
location
and
sector.
Indirect f inance
Indirect f inance in the small - scale
will include credit to:
to
and
ma rketing
of
outputs
of
Advances
de ce ntra lis e d
to
coope ra tives
sector
viz.
of
produce rs
artisans
village
and
in
the
cottage
industries.
[c] Subsc ription to bonds i ssued by NABARD with
the
l ending
and
t rade,
self- employed
road
persons,
small
profess ional
and
water
a business
providing
any
service
ente rprise
other
esta blished
than
mainly
profe ssiona l
for
services
( fair
price
shops),
consumer
co - ope ra tive
not
or renova ting
existing
persons
equipment,
equipme nt
and/ or
ac quiring and repa iring business premises or for purc has ing
tools and/ or for working capital re quirements to medical
pra c titione rs inc luding de ntis ts, cha rtered acc ountants, cost
acc ountants,
solicitors,
contra ctors
practic ing
engineers,
or
company
secreta ry,
l awyers
architec t s , surveyors,
mana gement
consultants
come
or
the
[ d]
Small
Road
and
Water
Transpor t
Oper ators
( SRWTO)
Advances to small road and water t ransport ope ra tors
owning a f l eet of vehicles not exceed ing t en ve hicle s,
inc luding the one proposed to be
f inanced
cons titutes
other
than
t ruck
operators
urb an
them
to
improve
their
l iving
for
s t andards,
granted
urban
areas
State
s pons ored
or ganization
for
scheduled
sa nctione d
to
State
Spons ored
and supply
Tribes
of inputs
for
to
loans
granted
to
the
weaker
Credit
in this
i t em.
These
include
agro
based
process ing
sector
would be
meat
produc ts,
f i sh proce ssing,
bread,
oilsee ds,
proce ssing
and
chocolate),
malt
and extruded/ other ready to eat food produc ts, aerated water/
soft drinks and other proce ssed foods, special Pac ka ging for
food proce ssing
indus trie s
and t echnical
assis ta nce
and
i s
cate gorise d as
that
made
by
for
the
under
priority
sector
be
l ending
and
unde rtaken
by
hire
banks
advances to
priority
in the
informal
sector
would
to
be e l igible
for
areas
who
are below the poverty l ine. Such loans t o urban poor may
be c l assified under weaker sections within
the
priority
sections
sector.
[ xiv] Weaker Sections
proper
a t t ention
in
the
) Small and
l and
share croppers
20
1
holding
of
farmers and
(b) )
Artisans,
village
and
cottage
indus trie s
where
(e)
Rate
of
Interest ( DRI)
Scheme,
(f)
Be ne fic ia ries
under
Swarna
under
the
Jayanti
Shahari
Rojgar
Yojana ( SJSRY),
(g) )
Be nefic ia ries
Scheme
and
(i) ) Loans to
debt to
l enders,
their
against appropria te
for
per
the
attaining
target s by
of
investing
the
in
Narasimham
fulfil
their
commercial
banks
can
ubs cribe
to
bonds
f inancing SSI
for
to special
f
bonds
inancing
i ssued
pump
set
by
REC
energisa tion
under
i t s
Special
Projects
the
objec tive
of
f in ancing
exclusive ly
as
Small
I ndus tr ies
Developme nt
Bank
of
India
( SIDBI)
C ommercial banks can s ubsc ribe to bonds exclusive ly
f loated by SIDBI for f inancing of SSI units and will
e l igible to be
be
indirect
f inance to SSIs.
[ v] The
National
Small
I ndus tr ies
Cor poration
Ltd.
( NSIC)
Subscription to bo nds i ssued by NSIC exclusive ly for
f inancing of SSI units will be e l igible for inclusion under
priority sector as indirect f inance to SSIs.
Housing
and
Urban
De ve lopme nt
C orpor ation
( HUDCO)
Subscription to bonds i ssued by HUDCO
exclusive ly
to
be
banks
on
the
nature
of
de posits.
Likew ise, the money l ent should be repaid on the due dates
of adva nces.
In the
pre- na tiona lisa tion period, that too before 1969 , rec overy
of loans was not much a problem for the bankers. This was
because the t raditiona l bankers were conse rvative in their
approach
and
they
knew
their
custome rs
pe rs onally.
bankers
granted
to
borrow ers
of
small
adequate
by
100 per cent recove ry. The motto of 100 per cen t recovery
i s meant for bankers, Government
servants
and
should
not
the
too,
be
misc ons true d as a press uriz ing act to demand 100 per cent
recovery for even priority sector adva nces. Priority i s for
giving
the
recove ry.
loans
This
and
not
chapter
for
exempting
throws
them
an insight into
f rom
t he
the
banker
for
the
the
following i ssues:
[ i ] importance of recovery of loans.
[ i i ] factors contribu ting to poor recove ry.
[ i i i ] s t eps in recovery of loans.
[ iv] suggestio ns for improving recovery of loans.
I mportanc e of recovery of loans
The importance of recovery of loans need not be over e mphasis ed. There i s a general saying that in a bank,
any
can
only
wise
person
for
loans:
l ending
banks.
[ i i ] The funds, which have been provided as loan, cannot
be recycled and to
that
extent,
the
more
de serving
bad,
when
results
in a lot of
c orre s ponde nc e
and paper work. A good recovery perce nta ge will avoid this
wastage of t ime and energy.
[ vi] A good recovery pe rc entage qua lifies the branch for a
better inspection rating.
Factors contr ibuting to poor recovery of loans
Innumerable factors contribute to the poor recovery
of loans by banks. [ See Diagram No. 3 . 1 ]
factor s result
in
borrower
oriente d:
[ a] Poor gener ation of revenue: The ina bility
of the
poor
ge ne ra tion and/ or
i t indus try,
failure of
the
project, be
cash
loans
in
spite
of
may
having
loans
in
the
expectation of
of
of
an
sum
and divert the loan procee ds. When the loan borrowed i s
not
ultima te ly
utilised
for
the
concerne d
project,
the
may
personal
which
interest
in the
project
for
not
have any
the
loan
i s
borrowe d.
[g] Other personal reasons: The
not repay
and
the family.
[ i i ] Banker- or ie nted: The bankers, on their part should
disc harge their obliga tions properly failing which i t results
in non- recovery of loans. The below - me ntioned
contribute to poor recovery of loans:
factors
banks: The
banks
agriculture
or industry
leading
to
sub - s t andard
failure
of the
project.
the
economic
f inancial
re quirements
of
the
are
unrealis tic,
initiating the
l arge
number
of
advance s,
poor
s taff
in
volve ment and other cons traints and indiscreet l ending under
G ove rnme nt schemes a l so contribute to poor recovery of
loans.
[ i i i ] Project - oriente d: Non- recovery of loans may
because of the project chosen by
the
borrowe r.
be
The
i s not
Failure
fails.
suitable
of
to
project
exper ie nce
in
mar ke ting:
Many
of
the
quality
but
in
to
will
be
unable
loans.
acc umula te d
losses,
wrong
se lection
and
subs ta nda rd
products
are
other
of
of
the
factors
waives
the
loans
borrow ed.
s t re ngthens the
loans
granted
has,
therefore,
to
be
f low
of
jeopardy
advanced .
These
s t eps are
are persuade d
by
This
by
loan
amount.
i s done
After
this,
the
banker
contact
s the
borrowe rs
Next,
the
and
have to
make certain
sac rifices in their mutual inte res t. The banker may have to
accept
revision
in
the
repay ment
sc hedule,
and waivers.
All
interest
these
Such
by f i l ing c ivil
s t ep
i s
t aken
may be f i l ed
s t a t ement of account.
[ c] See that a l l docume nts are in order.
[ d] Decide upon the l imita tion period,
i.e.
whether
obtained
advise r.
banks
10
bad
debts,
new
Act
known
1993 has
been
passed
ce ntres.
ins titutions
to set up Debt
set
as, the
up
R ecovery
a t
major
11
Ins titutions
of Debts
in dispute
to Banks
of
i s depos ite d.
no
appeal
[ii] The Sec ur itis atio n and Re c ons tr uc tion of Financ ial
Assets
and
Enforce me nt
of
Security
Interest
[ SAR FAE SI ]
Banks have adopted multi - pronged s t rategies to bring
down the volume of bad loans. These inte ra lia
aggress ive
provis ioning,
Corporate
rec overies.
Debt
The
include
Re s truc turing
SARFAESI Act,
directly
recourse
Laws
[ i i i ] Setting
up
of
Asset
R e c ons tr uc tion
Companies
[ ARCs]
SARFAESI Act enables to set up ARCs under
Companies Act, 1956 . Of the three
proposed
ARCs,
the
one
of
le gis lation
NPAS
would
provides
be
for
more
t ra nsparent.
setting
up
12
Asset
and
t ake
over
secured
the
assets
of
the
mana gement
of
the
13
Setting
up
National
Company
Laws
Tribunal
[ NCLT]
By amending the Companies Act, NCLT has been set
up to look after
restructur ing
of
adva nces.
NCLT will
References
1. Jyotsna Sethi and Nishwan Bhatia, Elements of Banking and Insurance, PHI
Learning Private Limited, New Delhi-1, 2008, p.83.
2. Agarwal, H.C., Banking Law and Practice, Swan Publications, Agra-4,
2006, pp.369-370.
3. ibid, p.83.
4. Report on Trend and Progress of Banking in India, 2006-07, p.72.
5. Report on Trend and Progress of Banking in India, 2005-06.
6. Kallapiran, T.R., Slogan for the Decade:100 per cent recovery, Indian
Overseas Bank Monthly News Review, Vol.IV, No.8, August, 1990.
7. ibid, p.271.
8. ibid, p.274.
9. Ajit Singh, Rural Development and banking in India-Theory and practice,
Deep and Deep Publications, New Delhi-27, pp. 365-378.
10.
Jhingan, M.L., Monetary Economics, Vrinda Publications [P] Ltd.,
Delhi-91, 2004, pp. 669-672.
11. ibid, 669-672.
12. Janardhan G.Naik, NPAs Management Challenges before banking sector,
The Management Accountant, Vol.41, No.5, May 2006, pp.355-360.
13. Rajendra Singh, Improving Recovery Climate of banks dues through
SARFAESI Act, 2002, Professional Banker, December 2005, The ICFAI,
pp.48-52.
Diagram No. 3 . 1
FACTORS C ONT RIB UTIN G TO POOR RECOVERY
Borrower oriented
Banker oriented
Project oriented
S o u r c e : P a r t h o P r a t i m R o y ,M a n a g e m e n t
of
Urban
CooperativeBanks, Himalaya Publishing house, M
umbai-4, 2001, p.272.
Diagram No. 3 . 2
STEPS IN THE RECOVERY PROCESS
PERSUASION
BANKER
BORROWER
NEGOTIATION
LITIGATION
BANKER
BORROWER
References
1. . Gordon, E, and Natarajan, K., Banking Theory,
Law
and Pra ctice , Himalaya Publis hing House, Mumbai, 2005 , p .
356 .
2. . Vasant
Desai,
Indian
Banking - Nature
and
Proble ms, Himalaya Publis hing House, Bombay - 4 , 1991 , pg.
344 - 346 .
3. . ibid.
4. . Venugopa l,
D, I t s l ike breathing
in and out,
Indian Overseas Bank Monthly News Review, Vol. IV, No. 8 ,
August 1990 , Editorial page.
5. . Sanyas iah, K., and R a nga na dhac ha ri, A. V., Money,
Banking and Inte rna tiona l
t rade, Maruti Book Depot,
Guntur - 2 , pp. 572 - 575 .
6. . Gordon, E., and Na ta rajan, K., opcit, p . 326 .
7 . ibid.
8. . Sa nyasia h,
572 - 575 .
K.,
and
A. V.,
opcit,
pp.
67
India,
13. . D harma raj, E., Banking Theory, Law and Prac tice, Scitech
Public a tions [ India] Priva t e Limited, Ch ennai- 17 , p . 55 .
14. .
Srivas ta va,
R. M.,
Mana gement
of
Indian
Financia l Ins titutions , Himalaya Publishing House, Mumbai 4 , p . 73 .
15. .
Prac tice,
18. .
Garhwal,
S.,
C ommercial
Banking
and
Economic D e ve lopme nt, Pointer Publis he rs, Jaipur - 3 , 1993 ,
p. 15 .
19. . Reddy, Y. V., Economic De ve lopme nts in India, Edited by
Raj Kapila and Uma Kapila, Academic foundation, New
Delhi- 92 , 2000 , pp. 43 - 64 .
20. .
Indian
29. .
Raman
and
Pandey,
C ommercial
Bank
Rural De ve lopme nt, Deep and Deep Public a tions,
Delhi, 1989 , pp. 67 - 70.
and
New
33. .
Ra ngas wa mi,
B.,
Public
Sector
Banking
India, Government of In dia, New Delhi, 1985 , pp. 8 - 9.
in
36. .
37. .
ibid.
38. .
Sundharam and Vars hney, op. c i t , p .
1 . 71 .
39. .
50. .
ibid.
55. .
ibid.
56. .
ibid.