When you face issues with NPL or Non-performing loans, it is not just a regulatory issue, but a way to enhance profitability and keeping good health of the balance sheet.
When you manage non-performing loans, it means you will be replacing it with sound exposure Since lower earnings of NPL will substitute the rates charged on new business, the interest income will go up.
Some other benefits are lowering the capital requirement and funding costs which will be coming from the drop of NPL.
One can seek help from npa financial services for steps needed to face trouble with non-performing loans.
NPL Solution
It would be best if you had a clear strategy to deal with the problem of Non-performing loans.
Do the operational assessment first
What is involved in the operational assessment? It includes the assessment of internal capabilities and resources within the bank to manage the issue.
You need assess the external environment as well to know if there are any solutions the bank has to deal with the balance sheet issues.
It would be best if you analyzed regulatory implications as well.
Strategic development
It is very much essential to derive a strategy for NPL so that short, medium, and long-term goals can be attained. You need to set qualitative and quantitative targets accordingly.
Consultants who offer npa funding in india can help in the assessment as well as considering the changes and other implications.
Implementation and embedding the strategy
After completing the operational assessment, now it is the turn to implement the operational plan. To embed the strategy; it is required to have a proper governance structure within the bank. A structured management process enables regular reviews and independent monitoring.
Implementation and embedding the strategy
Financial institutions where the percentage of NPL is more than 15% are considered to have high NPL problem. It is important to follow a clear process to achieve an optimal decision.
The solution can be a mix of ‘on-balance-sheet’ solution to an off-balance-sheet solution.
It could be:
- Loan settlement
- Internal workout
- Securitization
- Direct sale
- Asset management
By following these practices, it is possible to get rid of the problem of Non-Performing Loans.