Page 209 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes Self Assessment

Fill in the blanks:
1. ________ means an asset or an account of borrower, which has been classified by a bank or
financial institution as substandard, doubtful or loss asset, in accordance to the directions
or guidelines on asset classification issued by the RBI.
2. The analysis and______ capability and level of transparency and control provided by a BI
solution could be one of the qualitative factors in support of a higher rating.
3. ______ is the technology that unites uncommon corporate data into one resource, groups
it as a single source of company truth, and leverages it to achieve the strategic goals of the
organization.
4. The solution to most of the ______ faced by banks lies in implementing business intelligence
(BI) solution.
5. ______ 2002 (Given in Annexure): This Act increased the scope for the recovery of NPAs.

10.7 Management of Non-performing Assets

The three important tools of the recovery mechanism of NPAs are (1) Debt Recovery Tribunals
(DRTs), (2) Corporate Debt Restructuring (CDR) Scheme and (3) Securitization and Reconstruction
of Financial Assets through SCs/RCs.

The DRTs, as recovery mechanism for NPAs, comprise of DRTs, recovery officers and DRATs
(Debt Recovery Appellate Tribunal).
The main elements of the DRT mechanism are: procedure of DRTs and modes of recovery of
debts determined by the DRTs and DRATs.
A bank which has to recover any debt should approach the appropriate DRT which would issue
a summon to the concerned borrower to explain within 30 days as to why the relief should not
be granted to the bank. The DRT may make an interim order by way of injunction/stay/
attachment against the borrower to debar him from transferring, alienating or otherwise dealing
with/disposing of any property/asset without its prior permission. It may also appoint a receiver
of any property. The DRT would normally dispose of an application within 180 days. An appeal
against an order of the DRT can be filed with a DRAT on depositing 75 per cent of the amount of
debt due.
There are two modes of recovery of debt. The recovery officer can recover the debt by
(1) attachment/sale of property, (2) arrest/detention in prison of the borrower and,
(3) appointment of a receiver to manage the property. The recovery officer can also collect the
amount from other parties who owe money to the borrower.

The objective of the CDR framework is to ensure timely and transparent mechanism for
restructuring corporate debts of viable entities facing problems outside the purview of BIFR,
DRT and other legal proceedings.
The CDR system has a 3-tier structure: CDR standing forum, CDR empowered groups, and CDR
cell.

Notes The DRT would normally dispose of an application within 180 days.

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