How to Reduce NPA?

  • Setindiabiz Team
  • August 11, 2023
How to Reduce NPA? - Steps to control NPA
Reduce NPA (Non-Performing Assets) as we all know are those assets that are showing idle in the balance sheets of banks. Such assets are not able to contribute to the economy of the country. NPA of banks are in ever-rising mode no matter how hard government tries.
Every business has certain inherent risks, for banks inherent risk is nonrecovery of loans provided. The inherent risk can not be eliminated that can only be reduced. Bank can take the following steps to keep the NPA at a minimum level:

Steps to Keep the NPA at a Minimum Level:

Creditworthiness of Borrowers

Banks should stop giving money to unworthy people. Strict credit monitoring needs to be done by the lenders. Bank should not give loan to person who does not have any means to repay it.

Proper Follow Up

Collecting certified statement and debtors statement is not enough. There are many certified accountant who are ready to sign without verifying any single document. The external agencies are hired by the banks to follow up the credit worthiness of the borrower by checking their stock and debtors on regular interval.

Securitization of NPA

Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 also known as securitisation act, has facilitated the banks to overcome the situation of NPA. Section 13 of the said act has given option to the banks to take following steps without the intervention of the court if banks are secured creditors:
  1. Bank can sell the NPA to asset reconstruction companies for cash.
  2. Bank can appoint the manager to manage the stock on which security is created.
  3. Bank can take the possession of the property on which security is created.

One Time Settlement

To avoid the litigation process bank should go for the settlement scheme. Recovery camp should be organized on periodic basis as it saves the time and energy of the banks which they can use on the productive activities.

Write off NPAs

Trimming the balance sheet by writing off the NPAs is last resort with the Banks. The Tax benefits can be claimed by the banks for the same.

Leave a Reply

Your email address will not be published. Required fields are marked *

Talk To An Expert

*Your Information is safe with us | Privacy Policy

Exclusive Offer For CA, CS, CMA, Advocate & Tax Practitioners

Apply for Professional Tax Registration

The Professional Tax is mandatory for every company, LLP, GST-registered business, and other applicable professionals. Registration must be obtained within 30 days of incorporation or registration date. Comply now to Avoid Penalty.

Professional Tax Applicable States

Free consultation and calculator of dues, interest & penalty, if any.

Shops & Establishment Act Registration

(Mandatory to all commercial establishments in every state)
All new establishments must register with the office of the Labour Commissioner (Under the applicable state Shops & Establishment Act) within 30 days of their incorporation for companies or LLPs or the start of business for proprietorships or other businesses.
Free consultation and help to calculate dues, interest & penalty, if any.

Protect Your Trademark Now!

(We help you file trademarks in India and abroad)
Don’t let copycats steal your Trademark or Brand. Register your trademarks now in India to protect your brand, logo, slogan, etc. We have helped over 15K Brands secure their IP.

You Can Protect the Following

Free consultation and Trademark Search in Governemt Database