AN EVALUATION, COMPARISON AND MANAGEMENT OF NON PERFORMING ASSETS (NPA) IN STATE BANK OF INDIA & ITS ASSOCIATES

Abstract

Banks should establish appropriate internal systems to eliminate the tendency to delay or postpone the identification of NPAs, especially in respect of high value accounts. The banks may fix a minimum cut off point to decide what would constitute a high value account depending upon their respective business levels. The cutoff point should be valid for the entire accounting year. Responsibility and validation levels for ensuring proper asset classification may be fixed by the banks. The system should ensure that doubts in asset classification due to any reason are settled through specified internal channels within one month from the date on which the account would have been classified as NPA as per extant guidelines. The classification of an asset as NPA should be based on the record of recovery. Bank should not classify an advance account as NPA merely due to the existence of some deficiencies which are temporary in nature such as non­-availability of adequate drawing power based on the latest available stock statement, balance outstanding exceeding the limit temporarily, non­-submission of stock  statements  and non­-renewal of the limits on the due date, etc.