Effective Management of NPAs

The Research Study on Management of Non-Performing Advances (with specific reference to Public Sector Banks) brought out their inevitable presence in the progressive credit portfolio of banks. These NPAs need not, however, require bail out measures either by the Government of India or the RBI, if the banks were to have a model to reduce their effect on the overall health of the Credit System. Not all NPAs, the study clearly established, result in losses. The study has revealed that the PSBs beelined for treasury management and retail banking as easier recourse to off-load their surplus liquidity in their anxiety to unburden the burgeoning NPAs. The banks long-term vision on the basic banking business got blurred in the process. Despite interest rate pressures, the deposits with PSBs became safe havens. Coupled with the relaxed regulatory requirements and dearth of well rated borrowers to avail credit at not so attractive terms and conditions, are the banks left with Hobsons choice? In view of this background, the study has come out with a statistical model by way of solution to contain formation of NPAs in future, to bring back the confidential level of bankers to improve the credit culture and expand credit in the required direction. The borrowers have an important role to play to improve the credit off-take from banks and have to project a better image of themselves in the credit market, the study concedes.