Author: Trapti Pareek, LLM (Corporate and Commercial Law), Manipal University, Jaipur
INTRODUCTION
Non-performing assets (NPA) are a key indicator of a bank’s health. There would be no progress or growth in the economy without banks. The proportion of non-performing assets has been used to classify banking performance. The financial services sector will have to accept disorder if it is to have any chance of recouping the money that was lost on loans that were not being repaid. Both the national economy and a bank’s balance sheet and accounts are negatively impacted by non- performing assets.
In order to recover NPAs from defaulters, banks must initiate legal action in civil court. A civil court order is necessary for this. After the notification is served, the court will issue a decree of the appropriate degree. The next step is to contest the order in the Supreme Court, which may take anywhere from five to twenty years. The assets of a defaulter will be sold at auction when notice is given by the Execution Court. In addition, the suit might be thrown out, making it difficult to retrieve NPAs through traditional means.
Non-Performing Assets may be reduced if the underlying assets are healthy and have been restructured effectively. Additional legislation for these procedures is needed to speed up the NPA recovery process. If you’re looking for a somewhere to stay that won’t break the budget, check out the Narasimham Committee’s recommended hotels. The need for regulatory changes in these industries was assessed by the relevant committees. Based on the work of these committees, the SARFAESI Act of 2002 was passed, allowing financial institutions to hold securities and quickly sell them without the need for a court to become involved.
The ratio of net non-performing assets (NPAs) to net loans fell to 1.3% in September 2022, the lowest level in 10 years, according to the Reserve Bank of India’s (RBI) Financial Stability Report (FSR).
The corporate sector contributes significantly to the bank’s high NPA levels. The bank’s NPA rate for business loans is close to 40 percent.
NPAs held by public sector banks will account for around 72% of the total in 2020-21, with the remainder held by NPAs held by private sector banks, foreign banks, and small financial institutions. When it comes to public sector banks, State Bank of India and Punjab National Bank have the greatest proportion of gross nonperforming assets (NPAs).
The amount of net nonperforming assets held by banks has decreased. As of March 2022, the net nonperforming assets (NPAs) of at least seven private banks, headed by HDFC Bank, are less than 1%. Federal Bank, Catholic Syrian Bank, IndusInd Bank, Axis Bank, and ICICI Bank are also included.
