Page 24 - Banking Finance October 2023

ARTICLE

LOAN

COMPROMISE

AND WRITE OFF IN

BANKS - RBI

RECENT

FRAMEWORK

Introduction: who do not respond to reminders, a personal visit has to
be made to their business or residential place. This is a more
In general, it is experienced that filing of suits against a
dependable recovery measure and, banks' experience has
defaulting borrower by banks and subsequent loan recovery
been satisfactory. During the visit, banks can not only
through the process of court is a cumbersome, expensive
recover the amount due but also assess the overall working
and time consuming, without any fruitful results in many
of the business unit. Over the years, it is observed that the
cases. One of the main reasons attributed for insufficient
number of visits to the borrowers is going down due to staff
loan recovery dues through the court is also the lack of
shortage in banks. Hence, the task of paying a regular visit
proper follow-up and timely action on the part of banks.
to the identified borrowers may be outsourced. In case
Hence, it would be a worthwhile exercise to prefer non legal
measures to legal measures. Non legal recovery initiative borrowers are not available, services of professional agencies
shall also be utilized to ascertain their whereabouts and take
starts with sending a reminder to a defaulting borrower
the possession of assets charged to the bank upon serving a
which is the cheapest mode of recovery.
notice.
Generally, response to the reminders particularly from
But care should be taken in appointing professional agencies
honest borrowers is encouraging. Therefore, for borrowers
after examining their credentials and keep a constant vigil
About the author on their practices and methods adopted for loan recovery.
The next one is debt restructuring for loan recovery which
Dr. V. S. Kaveri aims at making the borrower's business financially viable in
Retired Faculty the near future provided the same is technically,
NIBM, Pune commercially & managerially viable and, the borrower
continues to be honest and cooperative. For this purpose,

24 | 2023 | OCTOBER | BANKING FINANCE