NPA Recovery & Revival Steps for Banks
NPA Recovery & Revival Steps for Banks
Banks play a crucial role in the resolution and revival of NPA accounts. The following steps can ensure better recovery outcomes:
- Assess the root cause of the NPA situation.
- Provide additional working capital to restart stalled operations.
- Offer compromise or negotiated settlements by reducing or waiving interest/penalties.
- Convert part of the advance into a funded term loan to help the business generate income.
- Allow limited operations in the account to enable interest servicing and prevent further NPA classification.
Preventive and Curative Measures to be Taken by Banks for Containment of NPA
To prevent the creation and escalation of NPAs, banks must take both preventive and corrective measures:
- Conduct proper credit appraisal before sanctioning loans.
- Identify early warning signals and weaknesses in borrower accounts.
- Undertake timely asset upgradation through restructuring or reclassification.
- Use compromise settlements and OTS (One-Time Settlements) for quick resolution.
These proactive measures help maintain financial stability while supporting the borrower’s revival.