Purpose and Scope
The Year long Project aimed at examining the Asset Reconstruction Company with respect to: • NPA problem in India
• Asset Reconstruction Companies (ARCs) - their meaning, models, global experience and the scene in India • The perspective of bankers, ARCs and consultants on the Indian structure and • The ways and models to form a successful ARC
The information gathered is based on both primary as well secondary researches. Secondary research involved net-based research and library research, while primary research involved personal meetings.
As the thrust of the second phase of reform is on improvement in the organisational efficiency of banks, the critical area in the improvement of profitability of banks is the reduction of NPAs. As stated earlier, apart from internal factors such as weak credit appraisal, non-compliance and willful default, there are several external factors such as preponderance of certain traditional industries in the credit portfolio of certain banks, majority of which are suffering from serious inherent operational problems, natural calamities, policy and technological changes which increase the incidence of sickness, labour problems and raw materials and other factors which are out the control of banks. While banks cannot be blamed for advances becoming non- performing due to external factors, there is an urgent need that the banks address the problems arising out of internal factors and this may call for organisational restructuring of banks, a change in the approach of banks towards legal action which is generally the last step and not the first step, no sooner the account becomes bad and a clear thrust on improving the skills of officials for proper assessment of credit proposal, risk factor and repayment possibilities. Though there are problems in effecting recoveries and write offs and in compromise settlements, it is of utmost importance that necessary changes are brought about in the related legislations for making recovery process more smooth and less time consuming and also create other alternative channels/agencies for recovery of debt/ reduction of non-performing advances. As the Lok Adalat have proved a very good agency for quick justice and recovery of smaller loans, their use could go a long way as a supplement to the efforts of recovery by the DRTs. The setting up of Asset Reconstruction Company can also play a vital role in reduction of NPAs and thereby provide necessary liquidity to banks through securitisation of banks loan assets. Government and other authorities could also devise policies having a bearing on the industrial sector, agriculture and trade with a long-term perspective to avoid sickness in the industry and adverse impact on borrowers because of sudden shift in the policy. Reduction of NPAs in banking should be treated as a national priority item to make the Indian banking system more strong, resilient and geared to meet the challenges of globalisation
TABLE OF CONTENTS
|Sr No |Title |Page No. | |1 |Introduction to NPAs problem in India |06 | |2 |Various Measures for Reducing NPAs |09 | |3 |Introduction to Asset Reconstruction Company |14 | |4 |Different Models of ARCs |19 | |5 |ARCs – The Indian Scenario...