The Finance Ministry has expressed concern over the low rate of recovery from written-off accounts. The ministry said that public sector banks should increase it to 40 per cent, sources have informed.

The rate of recovery is 15 percent

Presently the recovery rate from written off accounts is less than 15 per cent. Public Sector Banks (PSUs) have been able to recover only 14 per cent of the amount written off in the last five years ending March 2022. During this, a total of Rs 7.34 lakh crore has been written off. Out of this, PSBs recovered Rs 1.03 lakh crore.

The meeting will be held with the officials of the government bank.

Sources said that it seems that after writing off the bad loans, the banks get complacent about the recovery from those non-performing assets (NPAs). He said that this level of recovery is not acceptable. Also more recovery from written off accounts directly increases their profits and improves capital. Sources said the Department of Financial Services would soon hold a meeting with senior officials of public sector banks to review the position on the issue.

What is NPA?

NPA means Non Performing Asset means stuck debt. In simple words, you can say that after taking the loan, when the lender is not able to repay the installment, then the money of the banks gets stuck. First an attempt is made to deposit this amount towards the bank but later it is declared as NPA.

RBI informed that as per the guidelines of the Reserve Bank of India (RBI) and the policy approved by the Boards of Directors of the banks, Non-Performing Assets (NPAs) have been written off from the books of the concerned banks by writing them off. It also includes NPAs for which full provisioning was made.

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Keeping these conditions in mind, loan facility is provided by all the financial institutions like banks etc. You can take a loan from the bank not only for the house, but also for meeting all other needs ranging from car.

The loan amount along with interest has to be paid every month in the form of EMI. But sometimes due to difficult circumstances the EMI gets bounced. The situation for one or two months can be handled somehow, but if three consecutive EMIs are bounced then the bank can also declare you a defaulter and your property can be declared as NPA. Know here how your problem can increase due to continuous loan installment bounce.

What is the rule

According to the rules, if the installment of a bank loan is not repaid for 90 days i.e. for three months, then that loan is declared as NPA. In case of other financial institutions, this limit is 120 days. Increasing NPA is also not considered good for the health of any bank and it also creates many problems for the borrower.

Bad cibil score

The worst effect of loan installment bounce is on the CIBIL score. This spoils the CIBIL score. Due to bad CIBIL score, you may face problems in getting loans in future because the bank does not consider such people as reliable. In such a situation, even if the loan is somehow available, then very high interest rates have to be paid for that loan.

There are three categories of NPA

Even if the bank declares a property as NPA, it does not mean that it will be auctioned immediately. The bank has also made three categories in NPA. Substandard Assets, Doubtful Assets and Loss Assets. A loan account remains in the category of Substandard Assets account for one year, after that it becomes Doubtful Assets and when there is no hope of loan recovery, it is treated as a ‘Loss Asset’. After becoming a loss asset, there is a situation of auctioning the mortgaged property against the loan.

Compensation is done by auction

When the person is unable to repay the loan even after giving all the opportunities to repay the loan, then the bank takes possession of the mortgaged property. But after that the property is auctioned. That is, the bank gives many opportunities to repay the loan, yet the customer does not repay the loan, then as a last option, the loan amount is reimbursed by auctioning the mortgaged property.

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