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 Non Performing Asset means a loan or

an account of borrower, which has
been classified by a bank or financial
institution as sub-standard, doubtful or
loss asset, in accordance with the
directions or guidelines relating to
asset classification issued by RBI.
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 Earlier assets were declared as NPA

after completion of the period for the
payment of total amount of loan and 30
days grace.
 In present scenario assets are declared

as NPA if none of the installment is paid
till 180 days i.e. six months in respect
of a term loan.
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With effect form March 31, 2004, a non-performing asset

(NPA) shell be a loan or an advance where;
 interest and /or installment of principal remain overdue for

a period of more than 90 days in respect of a Term Loan,
 the account remains 'out of order' for a period of more

than 90 days, in respect of an overdraft/ cash
Credit(OD/CC),
 the bill remains overdue for a period of more than 90 days

in the case of bills purchased and discounted,
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 interest and/ or installment of principal

remains overdue for two harvest
seasons but for a period not exceeding
two half years in the case of an advance
granted for agricultural purpose, and
 any amount to be received remains

overdue for a period of more than 90
days in respect of other accounts.
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There are three major types of NPA:

Sub-standard : The account holder
comes in this category when they don’t
pay three installment continuously
after 90 days and upto 1year. for this
category bank has made 10% provision
of funds from their profit to meet the
losses generated from NPA.
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Doubtful NPA : under doubtful NPA there

are three sub categories :
 D1 i.e. up to 1 year : 20% provision is made by the
banks
 D2 i.e. up to 2 year: 30% provision is made by the
bank
 D3 i.e. up to 3 year : 100% provision is made by the
bank.
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Loss Assets : under this 100%

provision is made. When account
holder comes in this category their
account can be written off by the
banks.
Afterthis the assets are handed over to

recovery agents for sale
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 Lack of proper pre-enquiry by the bank for

sanctioning a loan to a customer.
 Non performance of the business or the
purpose for which the customer has taken
the loan.
 Willful defaulter.
 Loans sanctioned for agriculture purposes.
 Change in govt. policies leads to NPA.
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 Restriction on flow of cash done by

bank due to the provisions of fund
made against NPA.
 Drain of profit.
 Bad effect on goodwill.
 bad effect on equity value.
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YEARS SBI PNB ICICI UTI SCB
1996 7.31 10.21 3.69 5.33 3.30
1997 7.30 10.38 3.22 3.66 2.88
1998 6.07 9.57 1.14 5.63 2.42
1999 7.33 8.96 2.88 6.32 NA
2000 6.65 8.52 1.53 4.71 2.04
2001 5.33 6.69 3.36 2.39 1.53
2002 5.63 5.32 5.48 3.46 3.46
2003 4.5 3.86 5.21 2.39 2.39
2004 3.48 0.98 2.21 1.29 1.29
2005 2.65 0.2 1.65 1.39 1.39
2006 1.87 0.29 0.72 0.98 0.98
2007 1.32 0.28 0.78 0.72 0.87
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 The Securitisation and Reconstruction

of Financial Assets and Enforcement of
Security Interest Act, 2002 empowers
Banks / Financial Institutions to recover
their non-performing assets without the
intervention of the Court.
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 The Act provides three alternative

methods for recovery of non-performing
assets, namely: -
 Securitisation
 Asset Reconstruction
 Enforcement of Security without the

intervention of the Court.
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 The provisions of this Act are applicable

only for NPA loans with outstanding
above Rs. 1.00 lac.
 NPA loan accounts where the amount is
less than 20% of the principal and
interest are not eligible to be dealt with
under this Act
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 Itis the special court established by

central government for the purpose
of bank or any financial institutions
recovery.
 The judges of this court are the
retired judges of high court.
 In this court only the recovery cases
of 10 lakhs and above can be filed.
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 Banks have a specific cell for NPA, which is

called as Stress Asset Recovery Cell.
 This cell continuously works on “How
Recoveries Can Be Done”.
 Bank does its recovery by sending notices,
by bidding, and by taking a legal action.
 “DECREE” is a paper of court or the
permission given by the court to sell the
land or any asset.
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 This is the account which is made before NPA.

 When a customer’s account comes under this
account then immediate follow up is done by
the respective bank.
 Warning signals are given by the bank.
(when a bank has a doubt on a customer

although they have standard accounts, sr
stock statement etc)
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 When bank has a doubt on the intension

of the customer it ask for the whole
money to be paid back even, if he has
not paid two or three installments.
 Notices are sent to the customer.
 On recalled assets bank can take legal

action also.
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 Recovery agent : they are agents hired

by the banks for the recovery of the
non-performing assets at 10%
commission.
 Enforcement agent: they are the agents
hired by the bank after filing the case in
court. They are hired under SARFAESI
act at 10% commission.
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 Selfhelp group(SHG): SHG is a group of

10 to 15 people in rural areas which is
appointed by the banks especially SBI
as recovery agent for govt. sponsered
scheme like PMRY etc.
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 The Asset Reconstruction Company

Limited(ARCIL),
 India’s first ARC with an initial equity of
Rs.10 crore with ICICI bank, IDBI and SBI to
pick up 24.5% stake each(and remaining to
be acquired by HDFC, IDBI Bank and UTI
Bank).
 The second asset reconstruction company
(ARC), ASREC (India) in the country is set to
be operational soon
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31-01-2009 apurvgourav@gmail.

 Non Performing Asset means a loan or

 Earlier assets were declared as NPA

 In present scenario assets are declared

With effect form March 31, 2004, a non-performing asset

 interest and /or installment of principal remain overdue for

 the account remains 'out of order' for a period of more

 the bill remains overdue for a period of more than 90 days

 interest and/ or installment of principal

 any amount to be received remains

There are three major types of NPA:

Doubtful NPA : under doubtful NPA there

Loss Assets : under this 100%

Afterthis the assets are handed over to

 Lack of proper pre-enquiry by the bank for

 Loans sanctioned for agriculture purposes.

 Change in govt. policies leads to NPA.

 Restriction on flow of cash done by

 Bad effect on goodwill.

 bad effect on equity value.

 The Securitisation and Reconstruction

 The Act provides three alternative

 Enforcement of Security without the

 The provisions of this Act are applicable

 Itis the special court established by

 Banks have a specific cell for NPA, which is

 This is the account which is made before NPA.

(when a bank has a doubt on a customer

 When bank has a doubt on the intension

 On recalled assets bank can take legal

 Recovery agent : they are agents hired

 Selfhelp group(SHG): SHG is a group of

 The Asset Reconstruction Company

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