Ways to tackle and recover NPA (Non- Performing Assets)
Due to various financial situations, most of the organizations face the threats of their assets turning into a non- performing asset. With the ridiculous amount of loan taken out, the repayment structure that is in place and with the interest amount to be paid; it is a horror story in the making.
Now while these assets are considered non-performing, it impacts not only the organization but the creditors and banks as well. We can’t stop NPA’s indefinitely but there is a way to minimize and reduce the increasing number of such assets.
Credit Monitoring- It is important to keep the business in check and monitoring their credit is very crucial. If you see that the company is not been able to make regular payments, you know that there is a possibility of this expanding into a huge problem. Cutting the cause from the root and maintaining the pre and post sanction credit monitoring results in less number of assets turning into NPA.
Indian Bankruptcy Code (IBC) – The RBI came out with this new rule in 2016 and it stated that the assets will be distributed according to a hierarchy.
The first priority would be given to the secured creditors who would get the outstanding money then the unsecured creditors would have priority over the trade creditors and lastly the government would be paid. This provided a relief among the creditors and everyone seemed to be onboard with this new regulation.
Lok Adalat, SARFAESCI Act (2002) and Debt Recovery Tribunals- These are some other platforms where the debt would be settled and distributed accordingly. The SARFAESCI Act helps settle such debts without the involvement of the court.
Accountability- Holding the senior as well the junior executive accountable is very important because this only helps the government and the banks to tackle the recovery of NPA.
It looks like the system is changing and the rise of entrepreneurs is anew but it is important to tackle such situations with utmost dignity and complete transparency because that is how trust is build in this business world.