Effect of Securitisation On NPA

A Dissertation in the Financial Sector
“An Exploratory study on the Impact of The Securitisation &Reconstruction

of Financial Assets and Enforcement of Security Interest Act, 2002 on the
Non Performing Assets in the Banking sector”
Submitted in partial fulfillment of the requirements for the award of MBA degree
Of Bangalore University
Submitted By
“Supriya R”
Register Number:
04XQCM6114
Under the Guidance of
Prof. Sathyanarayan
M.P.Birla Institute of Management

Associate Bharatiya Vidya Bhavan
Bangalore- 560001
2006 - 2008
M.P.BIRLA INSTITUTE OF MANAGEMENT Page1
Declaration
I declare that this dissertation titled “An Exploratory study on the Impact of
The Securitisation & Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 on the Non Performing Assets in the Banking
sector” is an original and bonafide work carried out in partial fulfillment of the
requirement for the award of MBA degree of Bangalore University. No part of
this presentation has been previously published or submitted as a project report
for any other degree/diploma of Bangalore University or any other University.
Place: Bangalore (Supriya R)

Date : Reg. No. 06XQCM6114
Principal’s Certificate
This is to certify that the Project titled “An Exploratory study on the Impact of
The Securitisation & Reconstruction of Financial Assets and Enforcement of
Security Interest Act 2002 on the Non Performing Assets in the Banking sector”
has been completed by Ms. Supriya R bearing the registration number
06XQCM 6114 under the guidance of Prof.Sathyanarayan. This study has not
formed the basis for the award of any other degree/diploma by any other university.
Place: Bangalore
Date: 2.May. 2008 (Dr.Nagesh S.Malavalli)
Project Guide’s Certificate
This is to certify that the Project titled “An Exploratory study on the Impact
of The Securitisation &Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 on the Non Performing Assets in the Banking
sector” has been completed by Ms. Supriya R bearing the registration number
06XQCM 6114 under my guidance. The study has not formed the basis for the
award of any other degree/diploma by any other university.
Place: Bangalore
Date:02.May.2008 (Prof.Sathyanarayan)
M.P.BIRLA INSTITUTE OF MANAGEMENT
Page4
ACKNOWLEDGEMENT
This Project report has been made possible through the direct and
indirect co-operation of various people to whom I wish to express my
deep sense of gratitude.
I wish to express my sincere thanks to Prof. Sathyanarayan (Finance

faculty), M.P. Birla Institute of Management, Associate Bharatiya
Vidya Bhavan for providing valuable guidance and advice throughout,
which has enabled me to complete the project successfully.
I would also like to express my profound gratitude to all those who

have been instrumental in the preparation of the project report.
Supriya R
Page5
List of Contents
CHAPTER PARTICULARS Page No.
3-11
1 RESEARCH EXTRACT
12-32
2 INTRODUCTION
2.1 Background of the Study
2.2 Statement of problem
2.3 Need and importance of the Study
2.4 Objectives of the Study

33-38
3 REVIEW OF LITERATURE
39-41
4 METHODOLOGY
42-54
5 PRESENTATION & ANALYSIS OF

DATA AND INTERPRETION
55-58
6 FINDINGS
59-63
7 SUGGESTIONS & CONCLUSION
64-68
8 ANNEXURES
Page6
LIST OF TABLE AND GRAPHS
44
1 Showing main reason for NPAs in Bank
45
2 Showing the measures for the recovery of NPAs
46
3 Showing mechanisms for the recovery of NPAs
Pre-Securitisation Act
47
4 Showing recovery mechanism for NPAs
Post-Securitisation Act
48
5 Showing practical measures
49
6 Showing reasons for effective applicability measures
50
7 Showing Securitisation Act empowered to the Bank
51
8 Showing the impact of level of NPAs in Bank
52
9 Showing the rate of impact of Securitisation Act in the
reduction of NPAs
Page7
CHAPTER 1
RESEARCH EXTRACT
Page8
RESEARCH EXTRACT
The term NPA refers to Non-Performing Asset. As per the Reserve Bank of India
guidelines an asset is treated as a Non Performing Asset, if interest and/or
installment of principal remain overdue for a period exceeding 90 days. NPAs are
those assets which do not generate any income to the banks; they drain off the profit
of the banks earned by the performing assets. The NPA affects the banks and
financial institutions mainly in the following ways:
At the Macro level, NPAs have choked off the supply line of credit of the potential
lenders thereby having a deleterious effect on Capital formulation and arresting the
economic activity in the country.
At the Micro level, unsustainable level of NPAs has eroded current profits of Banks.
They have led to reduction in interest income and increase in provisions and have
restricted the recycling of funds leading to various asset-liability mismatches. Besides
this, it has led to erosion in their capital base and reduction in their competitiveness.
The mounting menace of NPAs has raised the cost of credit, made Indian
businessmen uncompetitive as compared to their counterparts in other countries. It
has made Banks more averse to risks and squeezed genuine Small and Medium
enterprises from accessing competitive credit and has throttled their enterprising
spirits as well to a great extent.
Page9
While The Banking Industry in India is progressively complying with the international
prudential norms and Accounting practices, there are certain areas like recovery
management in which it does not have a level playing field as compared to other
participants in the International financial markets. Our existing legal frame work
relating to the commercial transactions has not kept pace with the changing times,
this resulted in slow pace of recovery of defaulting loan & mounting levels of NPA’s in
banks. Till 2002 neither there were any legal provisions for facilitating Securitisation
of financial assets of Banks nor was there any legal framework to take possession of
securities and sell them without the intervention of the court.
The Securitisation and Reconstruction of Financial Assets Act, 2002 was a step
in this direction. The Act has provided an enabling legal framework for setting up
of Securitisation or Reconstruction Company and the manner of acquisition of
financial Assets by such companies. This Act has been enacted to help Banks and
FIs to tackle the NPAs problem. The Securitisation Act enables the Banks and FIs to
sell off/transfer the NPAs without the intervention of court and the sale proceeds of
the assets are to be used for payment to the secured creditors for the assets taken
over from them. The Act was bound to create ripples in the corporate sector and at
the same time provide a much needed balm to the banks and financial institutions.
Hence it is quite necessary to study the impact generated by the act on banks and
financial institutions and assess how successful the Act was in the reduction of NPAs
in the banking sector
The nature of research was exploratory as well as diagnostic as the study was aimed
at exploring the impact of Securitisation Act on the Non- Performing Assets in the
banking sector. The research was also aimed at recognizing the areas of
improvement in the Act.The respondents were chosen on the basis of simple random
sampling, under this sampling design every item of the universe has an equal and fair
chance of inclusion in the sample.
Page10
The sampling unit was Banks especially the loan managers, the credit Managers and
the officers in charge of recovery department. The Banks were chosen randomly and
are from Bangalore.The total Sample size was fifty respondents for the questionnaire
and for the NPA and recovery statistics the sample size is five Public sector banks.
The Securitisation Act is a fine, comprehensive piece of legislation, it is also a
reassuring sign of Government’s commitment to reforms. Since the enactment of the
Securitisation Act, it was seen as a panacea to the entire problem of NPAs.The
banks are euphoric about the Act and are taking actions swiftly by issuing notices to
the defaulting borrowers. Defaulting borrowers who were not responding previously
started responding favourably and cash recoveries became a reality. However
nothing spectacular has happened, there are not many cases where change of
management has been affected or taking over the entire assets of a large
manufacturing unit etc. This is due to the various intricacies involved in the
implementation of the Act. After the analysis it can be concluded that overall the Act
has empowered the banks with additional powers for recovery and facilitated the
reduction of NPAs to the extent of seventy percent, however much needs to be done
by way of recovery reforms and development of market for distressed assets for the
Act to be more effective in realising its proposed objectives
Page11
CHAPTER 2
INTRODUCTION
Page12
INTRODUCTION
SECURITISATION ACT 2002
The need for the setting up an asset reconstruction company for acquiring
distressed assets from Banks and FIs with a view to develop market for
suchassets was being felt, since long. Narasimham Committee 1 &2 and the
Verma Committee on restructuring of weak Banks has strongly recommended
the setting up of Asset Reconstruction Companies (ARCs)
The business of Securitisation and Reconstruction is primarily meant for more

than one purpose:
To regulate the business of securitization and reconstruction
of the financial interest
To regulate enforcement of the security interest and for the
matters connected therewith or the matters incidental thereto.
The debt securitization is a new concept in the Indian financial markets and is
primarily meant for enhancing the liquidity of the Banks and FIs which have
extended financial assistance to the borrowers for various purposes. The debt
securitization makes available with these institutions the security papers against
the financial assets which have been created out of the financial assistance
sanctioned and disbursed by these institutions and in the case of a default by the
borrowers the secured creditors can have a recourse to either the securitization of
the financial asset or the reconstruction of the same.
Page13
What is Securitisation?
Securitisation is a process whereby the ‘originator’ of the various financial assets
including loans which are illiquid can transfer such assets to special purpose
vehicles(SPV) which issues the tradable securities against these loans and these
are issued to the investors. It is an acquisition of financial asset by any
securitization company from the ‘originator’ whether by raising of funds by such
securitization company from ‘qualified institutional buyer’ or by issue of
security receipts representing undivided interests in such financial assets or
otherwise.
Thus, there will have to be some sort of understanding between the QIBs and the
securitization company which can be ‘originator’ in the case of the banks and the
FIs which has extended the financial assistance to the ‘obligor’ who is supposed
to repay the financial assistance in instalments on some future dates as per the
agreement entered into by it with the bank. This can be referred to as the
‘security agreement. It is an instrument or any other document or arrangement
under which the ‘security interest’ is created in favour of the secured creditors
including the creation of the mortgage by the deposit of the title deeds with the
secured creditors.
Objectives of Securitisation
There are two basic objectives of securitization:
To reduce the assets of the originator to reduce the capital
requirement
To achieve the reduction in demand and time liability.
Page14
Once the assets go off the balance sheet the originator can thus reduce his capital
requirement, similarly on the liquidation of the assets the need for the time assets
and the demand liability comes down as these are subject to the statutory
reserves.
Securitisation as financial product

Securitisation is considered as financial product and the bonds/debentures can be
issued based on the future instalments against the financial assistance already
sanctioned and disbursed by the banks and financial institutions.
Some important terms on the concept of securitization:
1. Qualified Institutional Buyer: It can be a financial institution,
insurance company, banks, state financial corporation, state
industrial development corporation, trustee or any asset
management company making investment on behalf of any
mutual fund/ provident fund/gratuity fund/pension fund or any
foreign institutional investor which may have to be registered
with the SEBI or any other corporate body which can be
specified by SEBI.
2. Originator: The bank or the FI which offers the product is
referred to as the originator
3. Obligor: The client whose future installments are securitized is
referred to as the obligor (borrower).
4. Security receipt: is a receipt or any other security issued by a
securitization company to a QIB pursuant to a scheme,
evidencing the purchase or the acquisition by the holder
thereof, of an undivided right, title or interest in the financial
Page15
asset involved in the process.
5. Security agreement: An agreement, instrument or any other

document or arrangement under which security interest is
created in favour of the secured creditor including the creation
of the mortgage by the deposit of the title deeds with the secured
creditors.
6. Security asset: means the property on which the security interest
Is created.
7. Secured creditor: Includes any bank or financial institutions or
any consortium or groups of banks and financial institutions.
8. Secured debt: means a debt which is secured by any security
Interest.
9. Secured interest: means right, title and interest of any kind,
whatsoever upon the property, created in favour of any secured
creditor and includes any mortgage, charge, hypothecation,
assignment etc
10. Sponsor: means any person holding not less than 10% of the
paid-up equity capital of a securitization company or
reconstruction company
11. Borrower: means any person who has been granted financial
assistance by any bank or FIs who has been given any
guarantee or created any mortgage/pledge as security for the
financial assistance granted by any bank or FI.
12. Default: means non payment of any principal debt or interest
thereon or any other amount payable by a borrower to any
secured creditor consequent upon which the account of such
borrower is classified as ‘NPA’ in the books of account of the
Page16
secured creditor in accordance with the directions/guidelines
issued By the RBI.

13. Financial Assistance: means any loan or advance granted or
any debentures or bonds subscribed or any guarantees given or
letters of credits established or any other credit facility
extended by any bank or FI .
14. Financial Asset: means debt or receivable and includes:
A claim to any debt or receivable or part thereof, whether
secured or not.
Any debt or receivable secured by mortgage of or charge on
immovable property.
Mortgage, charge, hypothecation or pledge of immovable
property.
Any right or interest in the security whether full or part
underlying such debt or receivable.
Any beneficial interest in property, whether immovable or
movable or in such debt, receivable whether such interest is
existing, future or accruing, conditional or contingent.
Any financial assistance.
There may be two specific occasions when the need for the securitized asset and
its transfer may be necessitated so far as the ‘originator’ is concerned:
To increase its liquidity
To handle the non performing assets (NPAs) effectively
The Securitisation and Reconstruction of Financial Assets and Enforcement

of Security Interest Act, 2002 popularly called the Securitisation Act has
Page17
provided an enabling legal framework for the setting up of securitization or
reconstruction company and the manner of acquisition of financial assets by
such companies.
Commencement of The Act

st
The Act has been made effective from 21 June 2002, the date on which the first
securitization and reconstruction of financial assets and enforcement of security
interest ordinance, 2002 was promulgated.
This Act has been enacted to help Banks and FIs to tackle the NPA problem.
This Act can be broadly divided into four heads:
Securitisation of assets
Enforcement of security interest
Setting up of Central Registry
Establishment of an ARC
The two terms which have been used in the Act which are of special significance
are:
The security Interest
Financial Asset
The Act has explained these two terms in section 2(1) (zf) and 2(1)(L) as:
‘Security Interest’ means right, title and interest of any kind whatsoever upon
property, created in favour of any secured creditor and includes any mortgage,
charge, hypothecation, assignment other than those specified in section 31.
‘Financial Asset’ means debt or receivable and includes---
A claim to any debt or receivables or part thereof, whether
secured or unsecured.
Page18
Any debt or receivables secured by, mortgage of, or charge on,
immovable property
A mortgage, charge, hypothecation or pledge of movable
property
Any right or interest in the security, whether ful or part
underlying such debt or receivables
Any beneficial interest in property, whether movable or
immovable, or in such debt, receivables, whether such interest is
existing, future, accruing, conditional or contingent
Any financial assistance.
Purpose of the legislation:-

Our existing legal framework relating to commercial transactions has not kept
pace with the changing commercial practices and financial sector reforms. This
has resulted in slow pace of recovery of defaulting loans and mounting levels of
non-performing assets of Banks and FIs. Narasimham committee 1&2 and
Andhyarujina Committee constituted by t e Central government for the purpose
of examining banking sector reforms have considered the need for changes in
the legal system in respect of these areas. These committees, interalia, have
suggested enactment of the said Act for the securitization and empowering banks
and FIs to take possession of the securities and to sell them without the
intervention of the court.
The provisions of the ordinance would enable banks and FIs to :
Realise long-term assets
Manage problem of liquidity
Manage Asset-Liability mismatches and
Improve recovery
Page19
These could be achieved by exercising powers to take possession of securities,
sell them and reduce NPAs by adopting measures for recovery or reconstruction.
Provisions/Highlights of the Act

The Securitisation Act contains provisions to provide for the following:
a) Registration and regulation of securitisation companies or
reconstruction companies by the Reserve Bank of India(RBI)
b) Facilitating securitisation of financial assets of banks or
reconstruction with or without the benefit of underlying
securities
c) Facilitating easy transferability of financial assets by the
securitization company or reconstruction company to acquire
financial assets of banks and FIs by issue of debentures/bonds or
any other securities in the nature of a debenture
d) Empowering securitization companies/reconstruction companies
to raise funds by issue of security receipts to qualified
institutional buyers
e) Declaration of any securitization company or reconstruction
registered with the RBI as a public financial institution for the
purpose of section 4A of the Companies Act, 1956
f) Defining “security interest as any type of security including
mortgage and charge on immovable properties given for due
repayment of any financial assistance given by any bank or FIs
g) Empowering banks and financial institutions to take possession
Page20
of securities given for financial assistance and sell or lease the
same or take over management in the event of default, i.e. given
classification of the borrowers account as NPA in accordance
with the directions or under guidelines issued by the RBI from
time to time.
Certain provisions of this Act to apply after Central Registry is set up or

caused to be set up------‘The provisions of sub-sections (2),(3) and (4) of
section 20 and sections 21, 22,23, 24, 25, 26 and 27 shall apply after the Central
Registry is set up or caused to be set up under sub-section(10)of section 20.
No Asset Reconstruction Company or Securitisation company can commence or
carry on the business of Asset Reconstruction or Securitisation
Without obtaining a Certificate of Registration to be
granted
under section 3 of the Securitisation Act, 2002
Without having owned funds of not less than Rs.2 crore or such
other amounts not exceeding 15% of total financial assets
acquired or to be acquired by such company, as the RBI may
notify
Page21
All ARCs or Securitisation companies, which are in existence on the
commencement of the Act, shall make application for registration to RBI before
the expiry of 6 months from such commencement.All ARCs are to be regulated
and registered with the RBI. There will be a Central Registry and Central
Registrar, to whom details of all individual transactions are to be reported, on an
on-going basis.
BACKGROUND OF THE STUDY
General Background of Banking System

Banking system which constitutes the core of the financial sector plays a vital
role in transmitting monetary policy impulses to the economic system. Therefore
its efficiency and development are vital for enhancing growth and improving the
changes for stability. During the recent past, profits of the Bank came under
pressure due to rise in interest rates, decrease in non-interest income and
increase in provisions and contingencies.
Non Performing Assets

Globalisation, Privatisation and Liberalisation have been the buzz words from
1991. It has brought about a positive trend in all the industries not excluding the
Banking industry. But this has also brought about an increase in the NPAs of the
Banks which has affected the banks lending, liquidity and profitability.
Recovery of NPAs is one of the major goals of the banks. Non Performing Asset
has emerged since over a decade as an alarming threat to the Banking industry in
our country sending distressing signals on the sustainability and endurability of
the affected banks. The positive results of the chain of measures affected under
the Banking reforms by the Government of India and RBI in terms of the two
Page22
Narasimham committee Reports in this contemporary period have been
neutralized by the ill effects of this surging threat. Despite various correctional
steps administrated to solve and end this problem, concrete results are eluding, It
is a sweeping and all pervasive virus confronted universally on banking and
financial institutions. The severity of the problem is however acutely suffered by
Nationalised Banks followed by SBI group and All India Financial Institutions.
The concept of Asset Quality on the books of Public sector Banks and FIs came
into being when RBI introduced prudential norms on the recommendations
of the Narasimham committee in the year 92-93. The above norms have
three main criteria:
Asset classification
Income Recognition
Provisioning
1. ASSET CLASSIFICATION
The loans given by the Banks are classified into performing and
non-Performing assets on the following basis:
Performing Assets: also known as standard assets are the assets
which do not disclose any problem and which do not carry more
than the normal risk attached to the business. Performing asset
is one which generates income for the bank. It is an asset where
the interest and or principal are not overdue beyond 180 days
(modified to 90 days w.e.f.Mar 2004) at the end of the financial
year.
Page23
Non Performing Assets: An amount is to be treated as non
performing asset when it ceases to generate income for the
Bank. An asset may be treated as Non Performing Asset (NPA),
if interest and /or installment of Principal remain overdue for a
period exceeding 180 days (modified to 90 days w.e.f. Mar
04)and Banks and FIs should not take into their Income
account, the interest accrued on such NPAs, unless it is actually
received/recovered. NPAs are further classified into:
1. Substandard Assets: Loans which are non-performing for a
period not exceeding two years, where the current net-worth of
the borrower or the current market value of the security, against
which the loan is taken, is not enough to ensure full recovery of
the debt.
2. Doubtful Assets: Loans which have remained non-
performing for a period exceeding two years and which are not
classified as loss assets by for the management or the
internal/external auditor appointed by RBI.
3. Loss Assets: Assets where loss has been identified by the
internal/external auditor of the bank or the RBI, but the amount
has not been written-off wholly or partly. These assets are
considered unrecoverable and are of little value to the lending
institution.
2. INCOME RECOGNITION
The income recognition is linked to the concept of performance of
the assets. In other words the income from performing assets only
Page24
is to be recognized. The income from non-performing assets is
recognized only to the extent of actual recovery made during the
accounting year.
3. PROVISIONING
The amount of provision required to be created for each asset
depends on the classification of the assets, availability/value of
security, other guarantee available, the age of the NPA etc.
From the foregoing, it may be observed that the Prudential norms
have twin effect on the profitability of the Banks: The income from
the non-performing assets cannot be recognized except to the extent
of actual recovery. Bank is required to create provision for the non-
performing assets. Both these have a negative impact on the
profitability of banks.
IMPACT OF NON PERFORMING ASSETS

At the Macro level, NPAs have chocked off the supply line of credit
of the potential lenders thereby having a deleterious effect on Capital
formulation and arresting the economic activity in the country.
At the Micro level, unsustainable level of NPAs has eroded current
profits of Banks. They have led to reduction in interest income and
increase in provisions and have restricted the recycling of funds
leading to various asset-liability mismatches. Besides this, it has led to
erosion in their capital base and reduction in their competitiveness.
The mounting menace of NPAs has raised the cost of credit, made
Indian businessmen uncompetitive as compared to their counterparts
in other countries. It has made Banks more averse to risks and
squeezed genuine Small and Medium enterprises from accessing
Page25
competitive credit and has throttled their enterprising spirits as well to
a great extent.
General causes for Non Performing Assets

In priority sector advances-
Directed and pre-approved natures of loans sanctioned under
sponsored programmers.
Mis-utilisation of loans and subsidies.
Diversion of funds.
Absence of security.
Lack of effective follow-up (post-sanction supervision&
control).
Absence of bankruptcy and foreclosure laws.
Decrepit legal system.
Cost in-effective legal recovery measures.
Difficulty in execution of decrees obtained.
Lack of marketing support
In Non Priority Sector Advances:

Improper and inadequate credit appraisal.
Demand recession.
Frequent changes in Government’s policies.
Industrial sickness and labour problems.
Antiquated legal & judicial system.
Lack of legal reforms (Bankruptcy Foreclosure laws).
Diversion of funds.
Willful default.
Technology obsolescence.
Page26
Incompetence-Management failures.
Fear psychosis among Banks & lack of effective follow-up
(policing of assets by Banks)y
Political compulsion and corruption.
Measures to tackle the Non performing assets

Lok Adalats: Lok Adalats have been set up for recovery of
dues in accounts falling in the Doubtful and loss category with
outstanding balance upto 5 lakhs, by way of compromise
settlement. PSBs filed 109558 cases involving Rs.645.63 crores
upto Dec. 2001. They have been able to recover Rs.49.77 crores
th
only upto 30 Sept.2001. This mechanism has, however proved to
be quite effective for speedy justice and recovery of small loans.
Debt Recovery Tribunal(DRT): 22 DRTs have been set up

in the country during the last half a decade. DRTs have not been
able to deliver, as expected as they got swamped under the burden
of large number of cases filed with them since their inception. Out
of this 3049 cases involving Rs.42989 crores were still pending as
th
on 30 Sept. 01. However, DRTs could decide only 9814 cases
involving Rs.6264 crores pertaining to PSBs till 30.09.01. The
amount recovered in respect of such cases amounted to Rs.1864
crores.
Page27
One Time Settlement Schemes (OTSS): One Time Settlement
Schemes launched in May’99&July’00 has enabled Banks to
recover Rs.668 crore and Rs.2600 crores respectively by Sept.
2001. One more OTSS for outstanding amount in default upto 10
crores has been introduced in the month of Feb’03 its results will
be seen in due course.
Corporate Debt Restructuring(CDR): CDR is an non-

statutory mechanism institutionalized in the year 2001 to provide
timely and transparent system for restructuring corporate debts of
Rs.20 crores and above, of viable entities financed by Banks and
FIs under consortium or multiple banking arrangements. It is a
voluntary system based on debtor -creditor agreement (DCA) and
inter creditor agreement (ICA). At present 10 FIs and 49 Public and
Private sector Banks are the members of the CDR mechanism.
CDR system is applicable to the standard and sub-standard loan
accounts. However as per latest modifications, viable doubt- full
assets can also be taken up for restructuring based on the consensus
among atleast 75% of the lenders. Reference to CDR could be
triggered by:
a) Any one or more of the secured creditors who have minimum
20% share either in working capital or term finance.
b) By the concerned Corporate, if supported by Banks and FIs
having stake as in (a) above.
Structure:
CDR has the following 3-tier structure:
1. CDR standing forum: It is a representative general body of
Page28
all Banks and FIs participating in the CDR system. It is a self-
empowered body, which evolves broad policy guidelines and
guides and monitors the progress of CDR.
2. CDR empowered group: This group examines and takes
decisions on the proposals recommend to it by the CDR cell
for restructuring of the corporate debts.
3. CDR cell: It makes initial scrutiny of the proposals received
from the borrowers/lenders. Initially the borrower approaches
his Lead Bank/FI with a request to restructure debt, which in
turn puts up the proposed to the CDR cell. BIFR, DRT
referred, willful defaults, unviable doubtful and loss accounts
and suit filed cases are outside the preview of CDR. No
banker/borrower can take recourse to any legal action during
the stand-still period of 90-180 days, Once the reference is
made to CDR mechanism.
4. Super Majority Concept: In case, any restructuring is
approved by CDR by not less than 75% of the secured
creditors it becomes binding on all secured creditors even if
minority secured creditors have different mandate. However,
RBI recently fine-tuned CDR guidelines in this regard and
has now given the lenders the option to exit from the
package by selling their exposure to either the existing or
fresh lenders at an appropriate price to be decided
mutually .This move has given Private Banks, Foreign Banks
and PSBs,who have minority share in consortium a big
breather, as they were not comfortable with the mandatory
system. The new lenders will rank on par with other lenders
Page29
for repayment and servicing of dues, since they have taken
over the existing dues.
CDR is not applicable to accounts involving only one Bank or

one FI, even though it has an exposure over Rs.20 crores or
more. While the arrangements under the CDR scheme seem to be
feasible from debt restructuring perspective, its success depends
upon the cooperation extended by the borrowers and the bankers
on one hand and understanding among Banks and FIs on the
other.Presently the CDR scheme is its infancy stage, but if
implemented in its entirety with support from all the aggrieved
parties and the Government, it can help facilitate speedier
recovery of NPAs. Mechanism like debt for equity swap could
prove to be effective in solving the NPA problem, especially in
cases of unwillful default, wherein despite strong fundamentals,
the company defaults due to some extraneous factors.
Page30
STATEMENT OF PROBLEM
While The Banking Industry in India is progressively complying

with the international prudential norms and Accounting practices,
there are certain areas like recovery management in which it does
not have a level playing field as compared to other participants in
the International financial markets
Our existing legal frame work relating to the commercial
transactions has not kept pace with the changing times, this
resulted in slow pace of recovery of defaulting loan & mounting
levels of NPA’s in Banks.
The Securitisation Act was seen as a panacea to the entire
problem of NPAs.
Page31
NEED AND IMPORTANCE OF THE STUDY
The Banks and Financial Institutions have been burdened with

ever increasing Non Performing Assets. Till 2002 neither there
were any legal provisions for facilitating Securitisation of
financial assets of Banks nor was there any legal framework to
take possession of securities and sell them without the
The Securitisation and Reconstruction of Financial Assets Act,
2002 was a step in this direction. The Act was bound to create
ripples in the corporate sector and at the same time provide a much
needed balm to the banks and financial institutions.
OBJECTIVES OF THE STUDY
Primary objectives:
To gain insight into the various provisions of the Act with
special emphasis on reduction of NPAs in Banks.
To assess the effectiveness of the Act in realising the proposed
objectives.
Secondary objective:
To identify the loopholes in the Act, if any and to make
suggestions to plug the same.
Page32
CHAPTER 3
REVIEW OF LITERATURE
Page33
PURPOSE OF REVIEW OF LITERATURE
The purpose of review of literature was to identify the problem

statement, understand the secondary data that has been gathered in this
field of study and to make new findings on the problem statement.
METHODOLOG Y OF THE REVIEW OF LITERATURE

Methodology of literature review encompasses different facets of
information sources concerning Non-performing assets and the
Securitisation Act
Sources of information for the literature review are as follows

Banking magazines
Internet
Newspaper, publications and articles.
Page34
Conclusion
SC verdict on Securitisation Act — More bark than bite?

By Padmalatha Suresh
Bankers abhor them. Balance-sheets detest them. Borrowers (at least most of
them) do not want to be part of them. They are those dreaded three letters, NPA,
standing for `Non Performing Assets', euphemism used to describe difficult-to-
recover bank loans.
Therefore, when the Supreme Court upheld the constitutional validity of the
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (the Securitisation Act) on April 8, bankers breathed
a sigh of relief. The ruling would al1ow banks and financial institutions to take
possession of the security given by the defaulting borrowers and sell these assets
without having to go through protracted legal procedures.
The court, however, ruled as unconstitutional the provision that required
aggrieved borrowers to make an upfront deposit of 75 per cent of the dues
claimed in case they preferred to go on appeal again the lender's action.
The Securitisation Act aims to achieve two objectives: Make adequate

provisions for the recovery of loans and also to foreclose the security. The
Act was welcomed by the banking community, but resisted by the borrower
community. Understandably so. The validity was challenged in various courts on
the ground that it was predominantly in favour of lenders. Hence, lenders were
Page35
unable to enforce the provisions in full. The salient provisions of the
Securitisation Act state that the lender can take possession of the asset in case
the borrower does not discharge his liabilities within 60 days of the demand
notice from the lender. The lender can then manage the assets with a right to
transfer them by way of lease, assignment or sale. Are banks today equipped for
this? Imagine banks having thousands of such seized assets of various
descriptions and values in their physical possession.The sheer cost of
maintaining such assets in marketable form could be formidable. Borrowers
would know that their assets are in jeopardy if they do not deliver on their
promises or take the lenders into confidence in respect of their business risks.
The change would be in the attitude. And this change would go a long way in
enhancing the quality of the banking system's asset.
Page36
Securitisation—will they Act
By Hindustan times.com
Some in India Inc. may have had a bad year, thanks to the Securitisation Act but
almost all top bankers and financial institution honchos experienced relief wit
the passing of this Act. Having got armed under the Act to take possession of the
assets of defaulters, the past few weeks saw several banks send notices to
defaulters for recovery of their sticky assets. Be it a hotel, a factory, office or
residential premises, defaulters long habituated to making merry on borrowed
money are already finding the going tough.
The new Act is expected to arrest the mounting NPAs and help banks
improve their bottomlines.
MCCI welcomes Securitisation Act

THE Madras Chamber of Commerce and Industry (MCCI) has spoken in a
refreshingly different voice, from that of most others in the industry. It has
welcomed the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002, (or, the Securitisation Act), calling it
"a step in the right direction". In a note, the chamber has said: "The fact is, not
all businesses succeed and when a business does not succeed, the only exit
available for the lender is to securitise the assets and claim those margins, which
protect the money lender". At a press conference in Chennai, one member did
point out a "practical difficulty" in a bank taking over a piece of hypothecated
machinery and its ability to protect/sel it, but agreed that this question did not
come up with the Securitisation Act — it was there even before.
Page37
CONCLUSION
The literature review has been very useful and informative as it has thrown light
on the research and articles that have been written on the growing problems of
Non Performing Assets in the banking sector, its adverse effects on the
functioning of the banks and the various mechanisms available for recovery of
the NPAs with special reference to the recently enacted Securitisation Act.
Moreover it has helped in identifying the degree of research that has already
been done on the subject. It has narrowed the scope of repetition and has formed
the basis of secondary data for this study.
Benefits derived from the Review of Literature:
Helps to identify the problem statement

Helps to focus on the specific line of research
Helps a layman understand what is a non-performing asset and
the role of the Securitisation Act in the reduction of NPAs
Recognizes the key issues in the implementation of the
Securitisation Act
Literature review gives us an insight on the objectives of the
Act and the impact it has generated in the reduction of NPAs
in the banking sector
Throws light on the areas where the Act is rendered
ineffective
Helps in the identification of the loopholes in the
securitization act and facilitates to make recommendations for
plugging the same.
Page38
CHAPTER 4
METHODOLOGY
Page39
METHODOLOGY
The steps followed for undertaking the research study are presented below
TYPE OF RESEARCH:
The nature of research was exploratory as well as diagnostic as the
study was aimed at exploring the impact of Securitisation Act on the
Non- Performing Assets in the banking sector. The research was also
aimed at recognizing the areas of improvement in the Act.
SAMPLING TECHNIQUE:
The respondents were chosen on the basis of simple random sampling.
Simple random sampling is also known as probability sampling or
chance sampling, under this sampling design every item of the
universe has an equal and fair chance of inclusion in the sample.
SAMPLING UNIT:
The sampling unit was Banks especial y the loan managers, the credit
Managers and the officers in charge of recovery department. The
Banks were chosen randomly and are from Bangalore.
SAMPLE SIZE:
The total Sample size was 50 respondents for the questionnaire and for
the NPA and recovery statistics the sample size is five banks.
Page40
TOOLS FOR COLLECTION OF DATA:
Sources of data:
The data consisted of both primary data and secondary data
Primary sources of data:

Personal interviews with the help of Questionnaire with the Credit
managers, loan officers of various Banks.
Secondary sources of data:

Bare Act book on Securitisation Act, 2002
RBI/IBA bulletins and journals
Financial magazines
Financial statements/Annual reports of the Banks
Internet
Page41
CHAPTER 5
PRESENTATION AND
ANALYSIS OF DATA AND
INTERPRETATION
Page42
HYPOTHESIS
H0: The Securitisation Act is not successful in the reduction of
NPAs in the banking sector.
H1: The Securitisation Act is successful in the reduction of NPAs
in the banking sector.
STATISTICAL DESIGN
Statistical tools used for analysis were:
Z- test
Percentage method
Graphs
LIMITATIONS OF THE STUDY:

The study is subject to the views and statistics as expressed by
the concerned officials of the Banks.
The study is limited to a few Public sector banks only
Limited sample size of 50 within the area of Bangalore only.
No access to legal bodies like DRTs etc.
The actual identity of the Banks is kept confidential due to the
sensitive nature of the topic.
Page43
ANALYSIS OF QUESTIONNAIRE
1. What are the main reasons for NPAs in the Bank?

REASON'S Numbers
Improper Credit Appraisal 20
Lack of effective follow up 22
Diversion of funds 28
Absence of security 10
Management failures 6
Cost in-effective legal
measures 8
Difficult in execution of
decrees 12
Wilful default 12
Demand recession 0
Decrepit legal system 0
Graph showing the main reasons for NPAs in the bank
Interpretation:From the table it is clear that the main reason for NPAs in banks is
diversion of funds, improper credit appraisal and willful default followed by cost ineffective legal
measureand difficulty in the execution of decrees.
2. Measures for the recovery of NPAs adopted by the Bank
PREFERENCE Numbers
Legal Measures 22
Non legal Measures 2
Both 20
Other 0
Graph showing the measures undertaken by the bank for recovery of NPAs
Interpretation:
From the graph it can be interpreted that 45% of the respondents said that they take both
legal & non-legal measures for the recovery of NPAs, while 50% said they take only legal
measures and 5% said that they take only non-legal measures
3. Which of the following recovery mechanisms are adopted by the bank for NPAs pre-Securitisation Act?
RECOVERY MECHANISM Numbers

Lok Adalats 2
Civil Courts 14
Corporate Debt Re-Structuring 6
Debt Recovery Tribunal 16
One time settlement schemes 6
Others 0
Interpretation
14% of the respondents said they adopt one time settlement schemes as a recovery mechanism
for NPAs pre–securitisation act, 23% said Debt recovery tribunals 32% said
Asset Reconstruction Companies, 5% said Civil courts, 5% said corporate debt reconstruction and
23% said Lok Adalats.
4. Which of the following recovery mechanisms are adopted by the bank for NPAs
post-Securitisation Act?
RECOVERY MECHANISM Numbers

Lok Adalats 10
Civil Courts 2
Asset reconstruction/securitisation
Companies 14
Others 0
Interpretation:
14% of the respondents said they adopt one time settlement schemes as a recovery mechanism for
NPAs post –securitisation act, 23% said Debt recovery tribunals 32% said
Asset Reconstruction Companies, 5% said Civil courts, 5% said corporate debt reconstruction and
23% said Lok Adalats.
5. Which of the measures for recovery are practical?
PREFERENCE Numbers
Lok Adalats 10
Civil Courts 2
Asset reconstruction/securitisation
Companies 14
Interpretation:
9% of the respondents said that One Time Settlement scheme is the mosteffective recovery mechanism,
while 23% said Lok Adalats, 32% said Asset reconstruction companies, 27% said debt recovery
tribunals and 9% said corporate debt restructuring.
6. Which of the measures for recovery are effective?
REASON'S Numbers
Fast 20
Default less 12
Bound by Law 4
Simple 8
Interpretation:
45% of the respondents said that fast scheme is the most effective recovery mechanism,
While 27% said default less, 10% said bound by law, % said debt recovery tribunals and 18%
Said simple method
7. Do you think the Securitisation Act has empowered the banks with additional powers by facilitating the
formation of Asset reconstruction/Securitisation companies?
PREFERENCE Numbers
Yes 42
No 2
Interpretation:
95% of the respondents said that the securitisation act has empowered the banks with
additional powers by facilitating the setting up of Asset reconstruction Companies securitization.
8. Has the enactment of Securitisation Act reduced the level of NPAs in the bank?
PREFERENCE Numbers
Yes 42
No 2
Interpretation:
95% of the respondents said that the enactment of the Securitisation Act has reduced
the level of NPAs in the banks, while 5% said they can’t say whether the Act helped in
the reduction of NPAs in the banks.
9. How would you rate the impact of the Securitisation Act in the reduction of NPAs on a
scale of 1 to 10? (One being the lowest & ten being the highest)
RATING Numbers
Below 5 2
5 & Above 42
Interpretation:
95% of the respondents rated five and above 5 the impact of Securitisation act in the
reduction of NPAs and 5% rated below 5. From this it can be interpreted that the Act
has been successful in the reduction of NPAs in the banking sector.
STATISTICAL ANALYSIS
The impact of Securitisation Act in the reduction of NPAs in the Banking sector
Rating No of f(x) fxฒ

(x) Respondents(f)
3 3 9 27
4 3 12 48
5 26 130 650
6 12 72 432
7 6 42 294
265 1451
Standard deviation =√1451/50

─ (265/50) = 0.96
Mean = 265/50= 5.3

Mean1= (9+12)/6=
3.5
Z = 5.3 - 3.5/ 0.96 *

√1/50
= 13.34
Table value of Z is
1.96 at 5 % level of
significance.
Interpretation
As Z value is more than the table value H0 is rejected and H1 is accepted

Therefore it can be concluded that the Securitisation Act has been
successful in
the reduction of NPAs.
Page54
CHAPTER 6
FINDINGS
Page55
FINDINGS
An asset is treated as a Non Performing Asset, if interest and/or
installment of principal remains overdue for a period exceeding
90 days(w.e.f.1st April 2004)
The main reasons for an account becoming a non- performing
asset are diversion of funds, improper credit appraisal and willful
default followed by cost ineffective legal measures and difficulty in
the execution of decrees.
Before the enactment of the Securitisation Act the banker had
limited options for recovery which consisted of having an intensive
follow-up and interaction with the borrower and initiating legal
actions either through courts or Debt recovery tribunals.
The Securitisation Act empowers Banks/FIs to change or
takeover the management/possession of secured assets of the
defaulting borrowers& sell or lease out the assets without the
The measures to tackle the NPAs adopted by the bank post-
Securitisation Act include:
Issuing notices as per the SRFAESI Act and waiting for 60 days
Issue possession notice after 60 days and initiate steps to take
physical possession of securities
Sell the securities and adjust the amount to the NPAs.
The Act is applicable only if claim in respect of the financial
asset is made within the period of limitation prescribed under the
Limitation Act, 1963(36)
Page56
The Securitisation Act is not applicable in case of agriculturaL
properties
The act is not applicable to any security interest for securing
repayment of any financial asset not exceeding one lakh rupees.

The major issues of concern with the implementation of the Act
are:
Inability to dispose off the assets acquired under the act by
the banks due to lack of market for such assets.
Problems in disposing of land due to the restrictions imposed
by the Land ceiling laws.
Pricing of the acquired assets by the bank in the process of
selling them to Asset reconstruction companies which involves
huge discounts
The provisions of the act are applicable only in the case of
doubtful and loss assets
Parties delaying the proceedings initiated by the banks under
the act by contending in the courts/DRTs.
Difficulty in seizing the said property with tenants and
leaseholders occupying the property
Stays from civil courts by the parties against the action
initiated by the banks for seizure
Another issue of concern is the quality of the securitized
asset
Although the Securitisation Act empowers banks/FIs to
seize the secured assets of the defaulting borrowers without
the intervention of the courts, borrowers are still able to get
the proceedings under the act stayed by appealing in civil
Page57
Page58
Despite the many issues of concerns in the implementation of
the act overal the Act has been a boon for the banking community.
Majority of the bankers opined that the act was helpful in the
reduction of NPAs.
Page59
CHAPTER 7
SUGGESTIONS &CONCLUSION
SUGGESTIONS
The following are the suggestions to ake the Securitisation Act more
meaningful and effective.
In India, bulk of the NPAs relate to units that are either defunct or in
sectors like steel and textiles that have become uncompetitive or obsolete
with the opening up of the economy, lowering of tariffs or introduction of
modern technology etc. Unlike other countries, where there are
specialized markets for buying out the NPAs and selling them overtime,
there is no market for distressed assets in India. Hence specialized
markets for such securitized assets must be established.
Private investors should also be allowed to invest in securitized NPAs.
Asset reconstruction companies resort to issuance of bonds against
assets transferred from the banks. There should be a mechanism whereby
such bonds are guaranteed.
Banks and Asset reconstruction companies must be given sufficient legal
powers to recover the assets and dispose them off without the intervention
of the courts.
The banks and FIs will be shareholders as well as the customers of the
ARCs and hence they have an interest in its financial performance,
therefore the ARCs have to be given operational independence.
Banks should recognize hidden losses in transfer of NPAs to ARCs, if
banks transfer the NPAs at the market price they will have to book further
losses. Government should evolve a mechanism to quantify these losses
and arrange to recapitalise banks.
The NPA assets must be rated by a rating agency which would facilitate
the market for such assets, this would inturn reduce the holding cost of the
seized assets to the bank.
Recognition of the sale of property by the banks under the Securitisation
act by the Registrar.
The act has to be made applicable to agricultural properties also, this
would help curb the level of NPAs in the priority sector lending by the
banks.
The upfront payment by the borrower for challenging the action of the
bank under the act should be re-introduced with a lesser percentage of the
claimed amount.
The lending bank should be given more powers to seize and dispose off
the security and to attach any other additional security/asset available with
the defaulting borrower and court intervention in such proceeding should
be eliminated.
The Act has to be made applicable for recovery of all dues of banks and
FIs irrespective of the Limitations Act.
The Act has to be given same weightage on par with Revenue Recovery
Act.
The escape routes for defaulters like the interference of the Debt
Recovery Tribunal etc are to be removed.
Bankers handling the recovery operations should be educated on the
management and disposal process of the acquired assets and should also
be provided with management expertise while taking over the operations
of the companies.
The powers currently available to the bankers under the Act should be
explained to both the borrowers and the bankers for the effective
implementation of the Act.
CONCLUSION
The Securitisation Act is a fine, comprehensive piece of legislation, it is also a
reassuring sign of Government’s commitment to reforms. The Act empowers the
banks to change or take over the management or even take possession of
secured assets of the borrowers and sell or lease out the assets. This is the first
time that the banks can takeover the immovable assets of the defaulting
borrowers without the intervention of the courts. Banks under the act can claim
future receivables and supercede the Board of Directors of the defaulting
corporates. No court, other than the Debt Recovery Tribunal can entertain an
appeal against the action taken by the banks under this Act.
Since the enactment of the Securitisation Act, it was seen as a panacea to the
entire problem of NPAs. The banks are euphoric about the act and are taking
actions swiftly by issuing notices to the defaulting borrowers. Defaulting
borrowers who were not responding previously started responding favourably
and cash recoveries became a reality. However nothing spectacular has
happened, there are not many cases where change of management has been
affected or taking over the entire assets of a large manufacturing unit etc. This is
due to the various intricacies involved in the implementation of the act and its
consequences like interference of courts/DRTs in the proceedings initiated by the
banks under the act by way of granting stay orders, lack of market for such
securitized assets, lack of managerial expertise in case of such assets, concerns
of holding costs of such assets to the banks, the recent Supreme court decision
with regard to the striking down of the upfront payment by the borrower before
appeal warranted by the act as unconstitutional and the like.
In view of the above mentioned concerns it can be concluded, after the analysis
that overal the act has empowered the banks with additional powers for recovery
and facilitated the reduction of NPAs to the extent of 70%, however much needs
to be done by way of recovery reforms and development of market for distressed
assets for the Act to be more effective in realising its proposed objectives.
BIBLIOGRAPHY
JOURNALS / MAGAZINES
 Bare Act Book on Securitisation Act, 2002
 RBI/IBA bulletins and journals
 Financial magazines
 Financial Statements/Annual reports of the banks
 Banking journals of IIB (Indian Institute of Bankers)
Web Sites visited
 Search engines: google and yahoo
 www.rbi.com
 www.indiainfoline.com
 www.iib.org.in
CHAPTER 8
ANNEXURE
QUESTIONNAIRE
I am “SUPRIYA R “ currently pursuing my M.B.A. and I am conducting a study on
the impact ofthe Securitisation Act on the non- performing assets in the Banking
sector.
Please answer the questions below. Your Responses in this regard are very
valuable for the success of my project. Also note that the information so revealed
wil be utilized without directly disclosing the identity of the concerned
Bank/officials.
1. The Main reasons for NPAs in the Bank

□ Improper credit appraisal □ Decrepit legal system
□ Lack of effective follow up □ Cost in-effective legal measures
□ Diversion of funds □ Difficulty in execution of decrees
□ Absence of security □ Willful default
□ Management failures □ Demand recession
□ Others, please specify
2. Measures for the recovery of NPAs adopted by the Bank

□ Legal measures □ Non legal measures
□ Both legal&non legal □ Others, specify ___________________
3. Which of the following recovery mechanisms are adopted by the bank for
NPAs pre- Securitisation Act?
□ Lok Adalats □ Debt Recovery Tribunal
□ Civil courts □ One time settlement schemes
□ Corporate Debt Re-Structuring
□Others,specify____
4. Which of the following recovery mechanisms are adopted by the bank for
NPAs post-Securitisation Act?
□ Lok Adalats □ Debt Recovery Tribunal

□ Civil courts □ One time settlement schemes
□ Corporate Debt Re-structuring □ Asset reconstruction/securitisation
companies
□ Others, specify_____________
5. Which of the above measures is practicable and effective? and why?

___________________________________________________________
___________________________________________________________
6. The Securitisation Act has empowered the Banks with additional powers
by facilitating the formation of Asset reconstruction/Securitisation companies.
□ Yes □ No
7. Has the enactment of Securitisation Act reduced the level of NPAs in the
Bank?
□ Yes □No □ can’t say
8. If yes, in Q6 how would you rate the impact of Securitisation Act on a scale of
1 to 10?
9. Are there any issues of concern for the Bank in the implementation of the
Securitisation Act for recovery of NPAs? If so, what are they?
_____________________________________________________
________________________________________________
10. Are there any limiting factors in the Act in its present form that hinders its
effectiveness in the recovery of NPAs? If so, what?
_____________________________________________________________
_____________________________________________________
11. Your suggestions with regard to any changes that are to be made to make
the Act more meaningful and effective?
_____________________________________________________________
______________________________________________________
______________________________________________________
____________________________________________________
--------------------- THANK YOU--------------------
Page70

Effect of Securitisation On NPA

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A Dissertation in the Financial Sector

“An Exploratory study on the Impact of The Securitisation &Reconstruction

M.P.Birla Institute of Management

Place: Bangalore (Supriya R)

I wish to express my sincere thanks to Prof. Sathyanarayan (Finance

I would also like to express my profound gratitude to all those who

CHAPTER PARTICULARS Page No.

2.1 Background of the Study

2.2 Statement of problem

2.3 Need and importance of the Study

2.4 Objectives of the Study

5 PRESENTATION & ANALYSIS OF

The business of Securitisation and Reconstruction is primarily meant for more

Securitisation as financial product

5. Security agreement: An agreement, instrument or any other

issued By the RBI.

The Securitisation and Reconstruction of Financial Assets and Enforcement

Commencement of The Act

Purpose of the legislation:-

Provisions/Highlights of the Act

Certain provisions of this Act to apply after Central Registry is set up or

BACKGROUND OF THE STUDY

General Background of Banking System

Non Performing Assets

IMPACT OF NON PERFORMING ASSETS

General causes for Non Performing Assets

In Non Priority Sector Advances:

Measures to tackle the Non performing assets

Debt Recovery Tribunal(DRT): 22 DRTs have been set up

Corporate Debt Restructuring(CDR): CDR is an non-

CDR is not applicable to accounts involving only one Bank or

While The Banking Industry in India is progressively complying

The Banks and Financial Institutions have been burdened with

OBJECTIVES OF THE STUDY

The purpose of review of literature was to identify the problem

METHODOLOG Y OF THE REVIEW OF LITERATURE

Sources of information for the literature review are as follows

SC verdict on Securitisation Act — More bark than bite?

The Securitisation Act aims to achieve two objectives: Make adequate

MCCI welcomes Securitisation Act

Benefits derived from the Review of Literature:

Helps to identify the problem statement

Primary sources of data:

Secondary sources of data:

LIMITATIONS OF THE STUDY:

1. What are the main reasons for NPAs in the Bank?

Graph showing the main reasons for NPAs in the bank

RECOVERY MECHANISM Numbers

RECOVERY MECHANISM Numbers

Rating No of f(x) fxฒ

Standard deviation =√1451/50

Mean = 265/50= 5.3

Z = 5.3 - 3.5/ 0.96 *

As Z value is more than the table value H0 is rejected and H1 is accepted

repayment of any financial asset not exceeding one lakh rupees.

1. The Main reasons for NPAs in the Bank

2. Measures for the recovery of NPAs adopted by the Bank

□ Lok Adalats □ Debt Recovery Tribunal

5. Which of the above measures is practicable and effective? and why?

--------------------- THANK YOU--------------------

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