Banking Scenario has been undergoing constant change. Credit off-take is the Mantra of the Banking Sector. The expansion of business and area of operation has indirectly cast more responsibility on Banks. The growth of bank deposits puts great pressure on the banks to manage their credit portfolio with greater vigil and accuracy. To stay competitive banks have to build up their earning potential. According to Reserve Bank of India’s directives, banks are required to classify their Borrowal accounts on the basis of the latter’s performance and report the details along with their annual accounts.
Credit portfolio management is always coupled with Non Performing Assets (NPA) Management. NPA drags down the average yield on advances thereby affecting the profitability of the Bank. Staff productivity declines as more man power would be allocated to preparing returns, Statements, Compliance of Audit and filing of cases. Substantial funds would have to be blocked for making provision on NPA accounts. Concentration on follow up of bad advances leads to the neglect of routine/regular monitoring of good/fresh advances which in turn leads to such accounts also becoming bad and leading to mounting of further NPAs. This hampers growth and reputation of the bank thereby affecting the confidence of general public on Bank.
Reserve Bank of India has tightened Non Performing Assets (NPA) classification and provisioning norms. This has put enormous pressure on profitability of the Bank. To keep pace with expansion of credit, it is imperative to have a system for Post disbursement follow up and monitoring of Advances and Recovery. Delay in decision making or inaction reduces the chances of recovery and the time value of money.
As its very name implies, NPA recovery is the raison d’être of the Recovery Department. Most banks follow top-to-bottom approach when it comes to recovery operations. Thus, every year, HO fixes the NPA reduction budget for each Zone of the bank.
As a procedure, in the event of default in the payment of installments of any loan by the borrower, ideally, Banks should start the process of follow up with the borrowers. If there is no response then the bank should initiate proceedings against the borrower with a notice; a preliminary Notice of default to the borrower and the Guarantors/sureties, intimating the default and emphasizing the bank’s right to recourse.
It is observed that prompt action is not initiated at the incipient stage; when the accounts start showing either irregular repayment or operations. The time lag between the default in repayment of installment or operation in the respective loan account and action taken/initiated makes it difficult for the recovery of overdue at a later stage. A constant vigil on the operations of various Loan/Cash Credit accounts, prompt action to remind the borrowers about defaults and repeated follow up would yield better results.
FinLEGAL RECOVERY gives a solution to this long pending issue of monitoring and follow up of NPA. The product is Browser based, automated, work-flow driven, enabling scheduled alerts through SMS or Email, using the latest technology from Microsoft. The emphasis is on monitoring and follow-up of Loan accounts to ensure timely action, by giving warning signals and prevent a loan account becoming a NPA or for recovery or to initiate legal action.
FinLEGALREC0vERY restricts slippage of Standard Accounts to NPA Accounts by effective post disbursement follow up and monitoring of Advances by persuasive method, maintaining the quality of loan assets so as to ensure that maximum Loans outstanding at any given time remain within the Standard Asset category.
FinLEGAL RECOVERY helps take prompt and effective steps for up-gradation of identified degraded NPA Accounts by providing all tools for persuasive, quasi-legal & legal measures in the form of recovery in the normal course or action u/s 138 of Negotiable Instruments Act, SARFAESI Act or Arbitration Act as the case may be.
Besides NPA identification, it would be possible for the Recovery Department to review the status of NPA accounts for which legal action for recovery has been initiated. This software would let the user-department record at regular interval details of action taken by the branch in respect of NPA accounts individually. Also it would be possible for the user-department to record its observations/reactions vis-a-vis the branch action.
Once the date on which an account has become NPA has been indicated correctly, it is possible for the system to ask for further details which could be retrieved from core banking and processed for further action for recovery.
In this connection, the software would let the user record the basic information required for generating any report on the action taken status. Also there would be facilities for comparison across periods as well as comparison among branches. The solution will allow amendment of data entered in order to correct the validation errors and facilitate the user-department carry out an intense analysis of the data made available.
- Provides complete end to end solution with MIS on set parameters
- Helps implement time bound action plan based on first signs of likely or actual default accounts of the borrowers
- Strengthens the existing system of monitoring and follow-up of borrower accounts
- Helps to set up a procedure for time bound action plan at the Branch & Recovery Department level for initiating Recovery action, filing suites/ Arbitrations/cases, Executions of awards/ Recovery certificates, Tracking appeals & Applications of borrowers before BIFRI Actions under SARFAESI Act, compromise settlement / OTS, Adjustment of sale proceeds of prime & collateral securities
- Statement giving details of loan account numbers against which legal action is initiated in various courts.
- List of cases against which arbitration proceedings have been initiated with details of developments at various stages
- List of cases against which proceedings under section 101 have been initiated and the present status of the case
- List of cases against which proceedings have been initiated under SARFAESI and further action taken
- List of cases against which proceedings u/s 138 have been initiated and the present status of the case
- List of cases under which Court decree obtained and execution process initiated or to be initiated
- Status of various notices issued to defaulting borrowers
- Status of all cases where auction proceeding has been initiated
- Status of recovery on initiation of various forms of legal action
- Computation of cost of legal action for every action initiated and the quantification of resultant recovery of debts
- Facilitate consolidation of data and generation of consolidated statement for submission to Board
- Consolidation of supplementary information on incremental new NPAs during the quarter, half year or financial year
- To help branches record details in respect of the above statements.