NON-PERFORMINGASSETS (NPAs)

Immediate NPA Classification:

• • Borrower declared insolvent
• • Legal proceedings initiated
• • Security insufficient for recovery
• • Borrower absconded or untraceable
• • Fraud or misrepresentation detected
• • Business operations ceased

Upgrade Conditions:

• • Regular payments for specified period
• • Restructuring compliance
• • Financial viability restoration
• • Security enhancement
• • Management improvement
• • Regulatory approval (if required)

Agricultural Loans:

• • Seasonal payment patterns considered
• • Natural calamity impact assessment
• • Crop cycle alignment
• • Government scheme benefits
• • Regional economic factors
• • Cooperative structure implications

Infrastructure Projects:

• • Long gestation period consideration
• • Regulatory approval delays
• • Environmental clearance issues
• • Land acquisition challenges
• • Technology and execution risks
• • Government policy changes

Characteristics:

• • No default in payment obligations
• • Regular interest and principal payments
• • Strong financial position of borrower
• • Adequate security coverage
• • Good credit history and rating
• • Viable business operations

Provisioning Requirements:

• • Direct advances: 0.25%
• • Commercial real estate: 0.75%
• • Commercial real estate (residential): 0.75%
• • Capital market exposure: 1%
• • Personal loans: 2%
• • Credit cards: 2%

Definition & Features:

• • NPA for period ≤ 12 months
• • Well-defined credit weaknesses
• • Distinct possibility of loss
• • Current net worth inadequate
• • Primary source of repayment insufficient
• • Requires close supervision

Management Actions:

• • Enhanced monitoring and review
• • Restructuring consideration
• • Additional security requirements
• • Management intervention
• • Recovery action initiation
• • 15% provisioning mandatory

Classification Criteria:

• • NPA for period > 12 months
• • Collection/liquidation in full doubtful
• • Inherent weaknesses make collection questionable
• • Loss probable but not yet identified
• • Security value deteriorated
• • Legal complications possible

Provisioning Structure:

• • Unsecured portion: 100%
• • Secured portion (up to 1 year): 25%
• • Secured portion (1-3 years): 40%
• • Secured portion (> 3 years): 100%
• • Infrastructure projects: Special norms
• • Minimum 25% on entire asset

Identification Criteria:

• • Loss identified by bank/auditors
• • Uncollectible and of little value
• • No realistic prospect of recovery
• • Legal/other reasons prevent collection
• • Continued booking not warranted
• • Write-off recommended

Treatment Requirements:

• • 100% provisioning mandatory
• • Write-off from books
• • Continue recovery efforts
• • Maintain off-balance sheet records
• • Report to credit bureaus
• • Legal action continuation

Sub-Standard Assets:

• • General provision: 15% of outstanding
• • Secured by tangible security: 15%
• • Unsecured advances: 15%
• • Infrastructure projects: 20%
• • Commercial real estate: 20%
• • Minimum provision regardless of security

Doubtful Assets:

• • Unsecured portion: 100%
• • Secured portion (up to 1 year): 25%
• • Secured portion (1-3 years): 40%
• • Secured portion (> 3 years): 100%
• • Minimum 25% on entire outstanding
• • Additional provision for depreciation

Credit Appraisal Enhancement:

• • Robust due diligence processes
• • Enhanced risk assessment models
• • Industry and sector analysis
• • Management quality evaluation
• • Cash flow projections validation
• • Security valuation accuracy

Early Warning Systems:

• • Regular monitoring mechanisms
• • Financial ratio tracking
• • Market intelligence gathering
• • Borrower behavior analysis
• • Industry trend monitoring
• • Stress testing scenarios

Restructuring Options:

• • Rescheduling of payments
• • Reduction in interest rates
• • Conversion of debt to equity
• • Additional funding provision
• • Moratorium on payments
• • Change in security structure

Recovery Mechanisms:

• • SARFAESI Act enforcement
• • Debt Recovery Tribunal (DRT)
• • Lok Adalat settlements
• • One-time settlement (OTS)
• • Asset reconstruction companies
• • Insolvency & Bankruptcy Code

Digital Monitoring:

• • Real-time portfolio monitoring
• • Automated alert systems
• • Predictive analytics models
• • Machine learning algorithms
• • Data-driven decision making
• • Integrated risk dashboards

Process Automation:

• • Automated classification systems
• • Digital documentation management
• • Workflow optimization
• • Compliance monitoring tools
• • Recovery process automation
• • Reporting and analytics

Process Framework:

• • Corporate insolvency resolution (180+90 days)
• • Resolution professional appointment
• • Moratorium on legal proceedings
• • Committee of creditors formation
• • Resolution plan evaluation
• • Liquidation as last resort

Success Metrics:

• • Resolution rate: 40-45%
• • Average recovery: 35-40%
• • Time-bound process
• • Creditor-driven decisions
• • Business continuity focus
• • Market-driven valuations

Operational Model:

• • NPA acquisition from banks
• • Security receipts issuance
• • Asset management and recovery
• • Restructuring and turnaround
• • Sale to strategic investors
• • Value maximization focus

Benefits & Challenges:

• • Specialized recovery expertise
• • Bank balance sheet cleaning
• • Professional asset management
• • Limited success rates
• • Valuation challenges
• • Market liquidity constraints