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:
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 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: