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Management of Non-Performing Assets

The reduction In loan Installment to 90 days may raise the NAP levels In the short run. But In turn will Improve the asset quality of the banks. 2. The lenders cannot take undue advantage of the new act. Provisions for lenders liquidly have been added to protect the borrowers against irresponsible claims by lenders. 3. Private Banks have more efficient management of Naps as compared to Spas. 4. Gross Naps of Spas are 51 537 and whereas private sector Banks are 5771. 17. 5. Due to the introduction of serialization, public sector banks have been able to reduce their Naps too considerable event. Serialization Act Is remarkable legislation In the Indian Banking history, certain issues are yet to be resolved for effective, implementation of the Act. 7. NAP art can help reset lending rates. 8. The net Naps of BI has reduced from 9. 5% to 5. 33% 9. The net Naps of SIB has reduced from 6. 527% to 3. 44% 10. The net NAP of BBC has rates from 3. 54 to 10. 25%. Conclusion: There has been a continuous decrease in the time period considered to declare a loan as non-performing. The continuous decrease in the

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time period is to bring the Indian banking norms at par with international norms.

This move will certainly reduce the Naps and in turn improve the asset quality of the banks. ; Till recent past, corporate borrowers even after defaulting continuously never had the fear of bank safeguard the real interest of banks. ; However with the introduction of CARFARES ACT banks can issue notices to defaulters to repay their loans. Also, the Supreme Court has recently given the banks the freedom to sell mortgage assets of the borrowers, if they do not respond to the legal proceedings initiated by lender.

This enables banks to get rid of sticky loans thereby improving their bottom lines. Axis Bank, the third largest private sector lender in the country, today said it has classified its loans to Decca Chronicle Holdings as non-performing assets (Naps). “We have made provisions proactively. We have declared (the loans to) Decca Chronicle as NAP. We provided adequately against this exposure,” Assonant Sanguine, executive director at Axis Bank, told reporters. He declined to offer further details. L cannot comment on specific accounts and discuss details in public,” Sanguine said. It is believed the private lender has lent close to RSI 400 core to the many, which owns Decca Chronicle newspaper and the Indian Premier League (PILL) cricket team Decca Chargers. The Hydrated-based company has borrowed around over RSI 3,200 core loans from banks and financial institutions. The bank’s total provision during July-September period almost doubled from a quarter ago to RSI 509. 4 core.

Sanguine said the bank has made RSI 115 core excess NAP provisions than it was required to because of the current uncertain economic environment. Axis Bank held a provision coverage ratio of 80 per cent as proportion to its gross bad assets including prudential write-offs at the end of September, 2012. The provision coverage ratio before accumulated write-offs was estimated at 90 per cent. The private lender closed the quarter with a restructured loan portfolio of RSI 4,068 core, representing 2. 04 per cent of gross customer assets. “There is no particular trend.

We continue to maintain our guidance (on restructured loans) at RSI 4,000 core,” Sanguine said. “While the gross and net Naps at RSI 2,200 core and RSI 650 core, respectively were lower than consensus estimates, the overall provision expenses have dramatically shot up. With restructuring during the second quarter at RSI 320 core, the slippage umber may have remained high,” Shape Shavers, analyst with brokerage McKay Global Financial Services, said in his note to clients after the bank announced its second quarter earnings yesterday.

The brokerage noted that the proportion of the borrowers among the large and medium corporate with A and above rating has gone down in July-September period to 62 per cent. “Over last four quarters, Axis Bank has seen migration of up to 11 per cent of loans from A and above rated category to lower categories,” Shavers said. Increased by 22 per cent to RSI 1,124 core aided by higher interest and fee income, and lower expenses.

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