Non-performing Assets or NPA has been pain n the neck for quite some time in our country. Because of various loopholes in the system, companies and individual lenders used to get huge loans that were eventually turning into npa. As per new regulations, banks can now sell the stressed assets to other lenders, financial institutions, or non-banking financial companies.
Npa recovery process is a move that will speed up the resolution process and help banks in recovering huge money. Banks have been asked to frame clear policies and guidelines to sell stressed assets. It is assumed that this process will clear up the balance sheets and remove trillions of rupees marked as a non-performing asset.
Top management of banks has been told to review and find out assets for sale at the beginning of the financial year. The early it is identified, the better the price a bank gets. Some people think that banks should not be in the business of resolving or buying stressed non-performing assets. However, it came out to be a useful and effective idea.
In the year 2014, a framework was released to liberalize the rules and norms for selling and buying non-performing assets. For example, buyouts leveraged for specialized entities. Also, other steps were taken to improve the functioning of NPA recovery with the help of nclt lawyers mumbai.
Studies indicate that the process of selling and buying of the asset has brought a big change in the situation. Amongst other important steps are the establishment of national company law appellate tribunal, and DRT or Debt Recovery Tribunal.
RBI has asked banks to draft and outline clear policies on deciding the policies of valuing their assets that are required to be sold and to seek for DRT legal solutions. For exposure of more than 50 crores, RBI directs banks to maintain two external valuation reports.