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INDIAN BANKS BIG NPA PROBLEM AND DEBT RECOVERY SOLUTIONS

A dissertation submitted in partial fulfillment of the requirement for award of the

degree of

Master of Laws

Submitted by: - Under the supervision of: -

Name of student: Rubina Muazzam Faculty name: Ms. Vibha Srivastava

Roll no. : LS/LM/15/001 Designation: Professor

Enrolment no:15SLLALLM4003

School of Law and Legal Affairs

Noida International University

Gautam Budh Nagar,

Uttar Pradesh-India

(2015-2016)

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DECLARATION

I, Rubina Muazzam, daughter of Prof. Dr. Mohd. Muazzam hereby declare that the dissertation

on Indian Banks Big NPA Problem and Debt Recovery Solutions is original work, and it has

not been submitted, either in part or full, anywhere else for the purpose of, academic or

otherwise.

Date: Name of student: Rubina Muazzam

Roll no.: LS/LM/15/001

Enrolment no.: 15SLLALLM4003

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CERTIFICATE

This is to certify that Ms. Rubina Muazzam who is a bonafide student having enrolment No.

15SLLALLM4003. She is submitting this Dissertation entitled "Indian Banks Big NPA Problem

and Debt Recovery Solutions" for awarding the degree of Master in Laws. She has worked on

the above mentioned topic under my constant supervision and guidance to my entire satisfaction

and her/his dissertation is worthy of consideration for the award of the Degree of Master of

Laws. As this dissertation meets the requirements laid down by School of Law and Legal

Affairs, Noida International University, hence, I recommend this dissertation to be accepted for

evaluation.

Name of Supervisor: Ms. Vibha Srivastava Dr. Pankaj Dwivedi

Designation: Professor Head of Department

School of Law and Legal Affairs School of Law and Legal Affairs

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ACKNOWLEDGEMENT

On the occasion of the submission of this LL.M Dissertation synopsis on topic Indian Banks Big

NPA Problem and Debt Recovery Solutions, first of all I humbly pray to almighty God and then

my respected Father and Mother by whose grace this work has been completed. I express my

deep sense of gratitude to Dr. Pankaj Dwivedi, HOD, School of Law, Noida International

University, Noida, whose ideas have always been a source of inspiration for me. His disciplined

approach towards the life has always motivated me to do a work in a very systematic &

organized way within the proper time.

I express my sincere gratitude to the Professor (Dr.) Vikram Singh, the Honorable Pro-

Chancellor, (former DGP Uttar Pradesh), Vice-Chancellor Professor (Dr.) Kumkum Diwan,

Registrar, and Directors of all the schools of the University. They have been a source of

inspiration for me to complete this synopsis. They have been conscious guardian for me. I am

really grateful to them and remain thank full for their guidance.

I express my deep sense gratitude to my supervisor Prof. Ms. Vibha Srivastava School of Law &

Legal Affairs, Noida International University, Noida. She guided me in proper manner by which

it become possible to work on this issue. I am highly thankful to her.

I take this opportunity to express my profound gratitude to all the respected teachers of School

of Law and Legal Affairs. I have no words for the contribution of all my respected teachers and

staff of my University for their consistent suggestions regarding my Dissertation work, which

helped me immensely to undertake a long academic journey. Library staff also deserves my

special gratitude for their kind cooperation.

Last but not least, I am grateful to all my friends, to have been there with me to encourage, to

guide and help me out in the difficult moments of my life both in University and outside, during

the entire course of LLM.

Rubina Muazzam

LS/LM/15/001

15SLLALLM4003

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LIST OF ABBREVIATIONS

ABC: Adjusted Bank Credit

ABS: Asset Backed Securities

AFCs: Assets Financing Companies

ALM: Asset Liability Management

AMC: Asset Management Company

ANBC: Adjusted Net Bank Credit

ARC: Asset Reconstruction Company

BCBS: Basel Committee on Banking Supervision

BFS: Board for Financial Supervision

BIS: Beaureu of international Settlement

CADP: Common area development programme

CAPM: Capital Assets Pricing Model

CAR: Credit Adequate Ratio

CARE: Credit Analysis and Research Ltd

CCF: Credit Conversion Factor

CFSA: Committee on financial sector assessment

CIBIL: Credit Information Bureau Ltd

CLO: Collateralized Loan Obligation

CPs: Commercial Papers

CPC: Civil Procedure Code

CRR: Cash Reserve Ratio

CRAR: Capital Risk Weighted Asset Ratio

CRISIL: Credit Rating Information Service of India Ltd

DDP: Dessert development programme

DEA: Data Envelopment Analysis

DFI: Development Financial Institution

DICGC: Deposit Insurance and credit Guarantee Corporation

DPAP: Draught prone area programme

DRDA: District rural development agency

DRT: Debt Recovery Tribunal

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DRAT: Debt Recovery Applet Tribunal

DGA: Duration Gap Analysis

ECAIs: External Credit Assessment Institutions

ECGC: Export Credit Guarantee Corporation

FDI: Foreign Direct Investment

FI: Financial Institution

GOI: Government of India

GTB: Global Trust Bank

HFC: Housing Finance Company

IRDP: integrated rural development programme

IRAC: Income Recognition and Asset Classification

IRS: Interest rate swaps

KCCS: Kissan Credit Card Scheme

KYC: Know your Customer

LGD: Laws given default

MBS: Mortgaged Backed Securities

MFAL: Marginal farmers agricultural labourers

MOU: Memorandum of Understanding

MPBF: Maximum Permissible Bank Finance

MSME: Micro Small and medium enterprise

NABARD: National Bank for Agricultural and Rural Development Bank

NBC: Net Bank Credit

NBFC: Non Banking Financial Companies

NBFI: Non Banking Financial Institution

NC: Narasimham Committee

NGO: Non Governmental Organisation

NHB: National Housing Banks

NPA: Non Performing Asset

OBC: Oriental Bank of Commerce

OPS: Other Priority Sector

OSS: Off-Site Surveillance Software

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OTS: One Time Settlement

PACS: Primary Agricultural Credit Societies

PEO: Programme evaluation Organization

PLR: Prime Lending Rate

PSA: Priority Sector Advances

PSB: Public Sector Bank

PTC: Private Trust Company

PCBs: Primary Cooperative Banks

RFIs: Rural Financial Institutions

RIDF: Rural Infrastructure Development Fund

ROA: Return on Asset

RRB: Regional Rural Bank

SACP: Special Agricultural Credit Plan

SARFAESI: Securitization and reconstruction of financial asset and

Enforcement of Security Interest

SCB: Scheduled Commercial Bank

SEB: Salary Earners Bank

SFDA: Small farmers development agency

SGSY: Swarna Jayanti Gram Swarozgar Yojna

SHGs: Self Help Groups

SIDBI: Small Industry Development Bank of India

SLR: Statutory liquid Ratio

SME: Small and medium enterprise

SPV: Special Purpose Vehicle

SSI: Small Scale Industry

STCBs: State Cooperative Banks

TAFCUB: Task Force for Cooperative Urban Bank

TGA: Traditional Gap Analysis

UCB: Urban Cooperative Bank

VC: Venture Capital

WPI: Whole Sale Price Index

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TABLE OF CASES: NPA ACCOUNTS

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INDEX

CHAPTER NO. SUBJECT

PAGE NO.

Declaration 2

Certificate 3

Acknowledgement 4

List of Abbreviations 5

Table of Cases 8

Chapter 1 Introduction 13

1.2 Abstract 14

1.3 present scenario 14

1.4 classification of NPAs 15

1.5 Development and Comparisons of

Banks and Non-Banking Financial

Institution

17

1.6 Non-Banking Financial Company

18

1.7 Cooperative Banking Sector 19

Chapter- 2 Difficulties With The Non-Performing

Assets And Review Of Literature And

Genisis Of Committees.

37

2. Difficulties With The Non-

Performing Assets

38

2.2 Review Of Literature And Genisis

Of Committees

39

2.3 Various Committee Reports On

Credit

39

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2.4 Various Committee Reports On

NPA

42

2.5. Conclusions

43

Chapter- 3 Comparative Study With Other

Countries And Scope Of The Study

45

3.1 Comparative Study With Other

Countries

46

3.2 The Need for the Study 48

3.3 Statement of the Problem

4