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Prevention is better than cure says the old saying. It is very much true in the case of NPA also. But the pertinent question is whether the banks and Financial Institutions take such steps to prevent the account slipping into NPA.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI ACT) was enacted by Government of India to enable banks and financial institutions to realise long-term assets, manage problems of liquidity, asset liability mismatches and improve by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction.
The purpose of law is to ensure the dignity of human beings and to enable them to lead a decent life as free citizen having their human rights and constitutional rights protected and upholding the principles of natural justice. But the way the SARFAESI Act is interpreted and implemented by the secured creditor, authorised officer and the presiding officer of DRT and even by some of the High Court and Supreme Court judges make one believe whether the Act is an infringement into the human rights and constitutional rights of the citizens.
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 were enacted by the Government to be exclusively used for the recovery of debts of Banks and Financial Institutions.
Management of non-performing asset (NPA) is one of the foremost challenges of the banks and financial institutions. Most of the time while finding solutions to this issue, the more important aspect of human resources is being side tracked and concentration is more on the technology, rules and regulations and systems and procedures.
The law mimics the human condition in its ambiguities. Great effort has been put forth to project the image of objectivity and a lack of bias in legal decisions. Try, as they may, for better or for worse, humanity cannot extricate itself from its own prejudices and agendas.
Proper monitoring of credit in banks has assumed greater significance in the effective management of lending. The success of credit monitoring largely depends on two aspects namely the co-operation of the borrower clients in furnishing the required data and statements to the banks on time and the capacity and knowledge of the credit monitoring authorities to take timely decisions and corrective steps to keep the borrowal accounts in good health.
Action alone produces the result and credibility does not depend upon what one says but what one does to produce the desired result. After having known the impact of NPA on the performance of the banks and financial institutions, understanding the reasons for the creation of NPA and its symptoms,
In the final analysis a meticulous and methodical study on the impact of NPA accounts on the banking, the reasons for the creation of NPA and to find the ways to prevent accounts becoming NPA and a cure if an account turns out to be an NPA
As mentioned therein, asset quality of banks is one of the most important indicators of their financial health. However, it has been observed that existing MIS on the early warning systems of asset quality, needed improvement.
