If you study the report published by IMF in 2006, then it reveals that the public sector banks have settled around one-third of the NPA cases for which notices were issued under the SARFAESI Act 2002.
Around 33000+ cases where notices were issued by the subsidiaries of the State Bank of India and other 20 nationalized banks, around 10000+ cases were settled.
Though the success rate looks impressive in terms of the number of cases, it is not that impressive in value. The total amount recovered is 500 crore, which is quite less compared to the total outstanding amount of 12000 crore rupees.
Recovery figures for different banks
The total recovery of SBI and its subsidiary banks was 80 crores as against the total loan outstanding amount of 4700 crores.
Punjab National Bank sent 3000 notices worth 700 crores and recovered around 40 crores.
Canara Bank issued 1000 notices for 350 crores rupees and recovered 35 crores.
Indeed, the success rate in value is not very significant; the long-term impacts of the act are there.
First is, banks have become confident that they will be able to recover the money in the future. Also, defaulters have realized that it will not be possible to defy the notices sent by banks in the future.
Thus, the act has undoubtedly brought a good impact on the NPA cases. It is sure that with the act becomes further stringent in the coming years, the amount of recovery will also increase proportionately.
The decline in NPA proves that the act is working
As you see, the way banks have been managing NPA after the introduction of this act shows that it is working.
There is a sharp decline in the number of NPA cases after 2002. The decline in the net NPA was 1.9 percent to 1.2 percent within a year.
There was a reduction in Gross as well as Net NPA in the year 2003-04. The proportion of net NPA to net advance was dropped to 2.9 percent from 4.4 percent in the previous year.
All these statistical evidence prove that the situation is improving quite fast.