Page 35 - Banking Finance AUGUST 2015

ARTICLE
NON- PERFORMING
ASSETS IN INDIAN
BANKING SECTOR &
MANAGING NPAS
THROUGH MIXED ROLE
SYSTEM THERAPY
Introduction
In the wake of the financial reforms undertaken by the
Government of India based on the Narasimhan Committee
report I and II, prudential norms were introduced by
Reserve Bank of India to address the credit monitoring
process being adopted and pursued by the banks and
financial institutions. To strengthen further the recovery
of dues by banks and financial institutions, Government of
India promulgated The Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 and The Securitization and
Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002.
The net non-performing assets (NPAs) of banks had gone
up 51% in FY 13 to RS.92825/- crores. According to a recent
CRISIL report, the gross NPAs of banks have slated to
About the author
Dr. L. N. Koli
Associate Professor, Deptt. Accountancy non-performing assets for the purpose of income recognition.
& Law , Faculty of Commerce, Dayalbagh
Educational Institute, [Deemed
University] AGRA-5 (U.P.)
BANKING FINANCE |
increase from 3.3% in March 2013 to 4% by March 2014.
The pertinent question is, will the banks and the financial
institutions shed heir jaundiced view towards declaring the
accounts as NPA and recovery of their dues coming under
the category of NPA and will they take a new and pragmatic
and practical approach of focusing on "efficiency and
fairness" and taking a tolerant view of "genuine difficulties
while coming down on mismanagement or fraud." As
exhorted by the Governor of RBI? The answer is a Big No.
If the present approach and attitude of the banks and
financial institutions are taken into consideration in the
matter of recovery of dues and financing.
The banks give advances to their customers by cash credits,
overdrafts loans and discounting their bills. Advances
classified into standard, sub-standard, doubtful and loss
assets in accordance with the guidelines issued by the RBI
and are stated net of provisions made towards non-
performing advances.
Assets of the banks are classified as performing assets and
Generally, it is assumed that, assets which are not non-
performing are performing assets. An asset become non-
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