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Importance of NPA Management

Posted Date: 20-04-2022 Posted By: user

The great increase in the Non-performing Assets or NPA and wilful defaults have raised major concerns in the past two decades. This has resulted in various reforms and modifications in the field of asset management in banks and financial institutions.

Given the potential adverse impact of it, policies concerning NPA resolution have been modified. NPA financing services Mumbai look after the issues such as how to prevent the occurrence of non-performing assets at a large scale?

Also, measures have been derived to manage the accumulated NPA burden.

So far, the focus of RBI and other regulatory authorities was to manage the NPA. There was an emphasis on finding ways to reduce its magnitude.

Also, banks wanted to clean up and restore the balance sheet at the end of the financial year. Indeed, it is a good initiative from the point of view of maintaining the financial health of the bank or financial institution. But prevention of NPA is also equally important.

Role of regulator

The government and the regulator play significant role in NPA management. When an NPA finance Mumbai company grants a loan to a customer, it is very much important that all precautions are taken to check the eligibility and legitimacy of the borrower.

The role of the government has been very much important historically whenever there is a crisis or failure. The government intervenes either directly or through the regulator.

Since the government is the principal owner of the majority of the affected banks in India, its role becomes furthermore crucial.

A framework for preventive measures is needed

Two things are critical in setting an NPA management system for any NPA financing services Mumbai. First is evolving a framework to bring transparency in operation management.

And the second is strengthening the audit system in banks.

When these two steps are in place, it is possible to scrutiny each loan case in detail. These efforts will reduce the possibility of collusion potentially among the officials of the financial institutions and the borrowers.

“Bad bank” is a new concept. It is a publicly-funded asset management company that will deal with stressed assets.

It formulates a resolution mechanism to maximize recovery. Thus, the burden on a bank or NPA finance Mumbai company will reduce

The Bad Bank will have 100% government ownership. The government may partly finance it. The proposed bank will function professionally and be accountable to the government.