Recovery Policy for the year 2012-2013

Introduction

The recovery policy (debt collection policy) of the Bank has been built keeping in view the dignity and respect to the customers. The Bank will not follow policies that are unduly coercive in recovery of dues from borrowers. The policy is built on courtesy, fair treatment and persuasion. The Bank believes in following fair practices with regard to recovery of dues from borrowers and taking possession of security (properties / assets charged to the bank as primary or collateral security) and thereby fostering customer confidence and long-term relationship.

Modifications

In order to reduce the Gross NPA level of the Bank in speedy manner and to recover substantial amount from overdue balances of irregular accounts, it has been felt necessary to revise / modify the existing Recovery Policy for settlement of NPA accounts and current irregular loan accounts so as to achieve the corporate target of the Bank during the residual part of the current financial year and also for future settlement of the proposals.

In the existing Recovery Policy, we propose the undernoted additions to make it more effective and purposeful:-

Recovery Cell

The Recovery Officer posted in the cell having administrative powers under the Rajasthan Cooperative Societies Act has since been withdrawn by the Cooperative Department. To fill up the gap and keep the pace of recovery going on, a senior officer of the Bank will be assigned to supervise the recovery work independently. Progress of the work undertaken by the Cell will continue to be reviewed by the Board as usual.

Write-Off of Bad Debts

In order to improve the quality of assets and minimize the non-performing assets, a policy for writing off bad debts in respect of which fruitful results are not forthcoming despite strenuous efforts and all avenues available for recovery are exhausted, has been formulated, salient features of the same are as under:-

Subject to substantial provision being available, writing off loan assets may be considered in the following cases:

  • Where recovery applications have been filed before the Court.
  • Where permission for initiation of legal action has been accorded and legal is in the process of initiation.
  • Where legal action is waived by the Competent Authority.
  • The account should have been classified as Loss Asset.
  • Adequate provision is available.
  • However, the small value accounts classified either as Doubtful or Loss and having outstanding up to Rs. 5.00 lac with adequate provision (minimum 50%) can be considered for write off.
  • All the accounts written off, irrespective of the outstanding amount or security available or initiation /non-initiation of legal action, be parked in AUCA and a record be maintained in separate register with full particulars.
  • Full / partial a write off may be permitted in respect of Doubtful Asset accounts subject to adequate provision being available. Upfront partial write off may also be permitted in One Time Settlements (OTS) to the extent of write off approved and be parked in Advances Under Collection Account (AUCA), without waiting for full settlement. The AUCA entry in such cases may be reversed on receipt of full payment under the OTS. If OTS fails, the balance outstanding may also be written off and parked in AUCA, subject to adequate provision being available.
  • Partial write off can only be permitted once during life of the account. The authority approving the write off will be Recovery Committee / Board
  • For calculation of the loss in a write-off proposal, same basis as in compromise proposals be followed.
  • The proposals for write off will be screened by the respective Screening Committee before taking a final view in the matter. It should be ensured that the Authority approving the write off proposals did not sanction the advance in question in his / her individual capacity. It is reiterated that the above relaxation in the write off policy should not in any way dilute the follow up recovery process. The structured mechanism for follow up of accounts parked in AUCA should be meticulously followed.
  • When all avenues available for recovery are exhausted, Bank will arrange for writing the likely loss with the approval of the appropriate authority. With a view to ensuring that all relevant aspects are given focused attention before writing off of loss in a fraud case, the process of seeking administrative clearance for the proposed write off will be followed. The authority for according such administrative clearance may be delegated by the Board of Directors to the Managing Director. Civil / criminal cases and recovery proceedings and other issues, if pending, would not be withdrawn.

Eligibility for writing off

All such loan accounts (NPA) for which sufficient provision is available in the balance sheet and classified as Loss Asset.

Writing off may be considered in the following cases also:-

  • Where recovery applications have been filed before DRT / suits have been filed before Court of Law.
  • Where action Under Section 13(4) of SARFAESI ACT 2002 has been initiated.
  • Where legal action is waived by the Competent Authority.
  • Where examination of staff accountability has been completed
  • Where permission for initiation of legal action has been accorded and legal action is in the process of initiation.

Procedure to be adopted for Written Off

The proposals for write off will be screened by the Screening Committee at Head Office before taking a final view in the matter. It should be ensured that there should not any member in the Screening Committee who had been the Sanctioning Authority / Recommending Authority in regard to these loan accounts. It should also be ensured that the Authority approving the write off proposals did not sanction the advance in question in his / her individual capacity. Thereafter, the identified cases will be put up to the Board of Directors and after getting their approval the outstanding balance of these accounts will be adjusted from the provision already made through Profit & Loss Account. All the accounts so written off, irrespective of the outstanding amount or security available should be parked in Advance Under Collection Account and a record be maintained in a separate register with full particulars of the account. For calculation of the loss in a write off proposal, the same basis as being taken in compromise proposals should be adopted.

It should be ensured that the above exercise of Writing Off the NPA Accounts should not in any way dilute the follow up recovery process. The structured mechanism for follow up of accounts parked in AUCA should be meticulously followed.

One Time Settlement Scheme

The One Time Settlement Scheme of the Bank will be made continued till 31.0.2.013, after obtaining approval from the Reserve Bank of India and the Registrar Cooperative Societies, as required.

Examination of staff accountability

It should be ensured that aspects of staff accountability are properly examined before recommending / sanctioning any compromise settlement proposal.  Head of the branch / Head of the Region should give the certificate as follows:

This is to state that I have examined the affairs of the account under consideration and have to certify as under– 

  • No fraud has been suspected / detected in the sanction / disbursement of the credit facilities.
  • No irregular actions on the part of any of the staff members which contributed to the account becoming NPA, have come to my notice.
  • No other staff lapses were observed by me.
  • I, therefore, recommend waiver / write off of the amount as proposed in the Process Note.

Examination of Staff Accountability in Respect of Fresh Slippage to NPA Category in All Accounts:

It has been decided that the NPA having the ledger balance up to Rs 50.00 lac shall be examined by the  Managing Director and the SAR shall be initiated by the Branch Manager  provided the Branch Manager/ Regional Head did not handle the account or accord sanction in the  account.

If the NPA accounts having the ledger balance above Rs 50.00 lac, , SAR shall be examined by the concerned General Manager in charge of the concerned credit department provided the loan was not sanctioned/ handled by him  and shall be dealt with/ decided accordingly by the said General Manager  on the basis of reports sent by the Regional Head.

The Regional Head in case of (i) & General Manager in case (ii) finds/ fixes any Staff Accountability, the matter should be referred to the Committee of General Managers for deciding Vigilance/ Non-Vigilance  nature of contemplated disciplinary action.

All accounts slipped into NPA category, Staff Accountability shall be examined within the period of Six months from the date of slippage to NPA and must be dealt with within 30 days. If there is no Staff Accountability, the matter should be closed immediately in the said account.

Settlement in Respect of Investment Portfolio

Compromise settlement in respect of investment portfolio of the Bank shall be governed by all the provisions of the policy applicable to settlement in NPA / Written off accounts.

Miscellaneous

Those compromise proposals which have already been received by the branches, but on which no decision has yet been taken, may be considered under the provisions of this revised policy.

Accounts in which settlements had been approved by R.O. or branch authority in the past but where entire settled dues could not be recovered yet (although stipulated time schedule had already expired), in such accounts fresh negotiation for arriving at a modified / amended settlement terms can be undertaken only by one step higher authority to the original sanctioning authority.

Generally, no settlement proposal should be rejected.  However, in case the sanctioning authority decides to reject any settlement proposal, proper reasoning for such rejection should be recorded and a written communication clearly stating the reasons for rejection should invariably be sent to the borrower.

CMD/ED are authorised to make changes in this policy as deemed necessary in a changed situation including the sacrifice/accepting lower settlement amount than approved by MCBOD.  However, sacrifice should not be more than 25% of original approved sacrifice.

CMD/ED may also exercise relaxation of sacrifice beyond their discretionary power but not more than 25% of the limit in deserving cases.

Guidelines of RBI on engagement of Recovery Agents by all scheduled commercial banks

For management of recovery, Recovery Agents are engaged by the Bank after exercising due diligence in the matter.   In order that the Recovery Agents engaged by the bank are properly trained to handle with care their responsibilities, RBI has issued guidelines on engagement of Recovery Agents under their circular DBOD no. Leg.BC.75/09.07.005/ 2007-08 dated 24.04.2008 (copy enclosed, marked Annexure–2)  As per the said guidelines (vide Para-2(xi) of the RBI circular) Recovery Agents and the personnel engaged by Recovery Agents, are to undergo a 100 hours of training programme on a certificate course devised by Indian Institute of Banking & Finance (IIBF) and on completion of the course to pass the examination conducted by the IIBF and obtain a certificate from the said institute within a period of one year.   

In pursuance to the same, the following course of action is to be taken:

  • Advise the Recovery Agents in our panel to undergo a minimum 100 hours training programme on a certificate course devised by IIBF from any of the Training Institutes accredited by IIBF and obtain a certificate from IIBF within March 2009.  The cost for this is to be borne by the Recovery Agents.  The Recovery Agents would be empanelled from our list if the IIBF certificate in their name is not obtained and submitted to Bank within March 2009.
  • Application for fresh empanelment of Recovery Agents will be considered by the Bank if the Recovery Agent and his personnel have undergone the IIBF 100 hours training course and certificate obtained from IIBF.
  • Sale of Non-Performing Financial Assets to Securitisation Companies (SCs), Asset Reconstruction Companies (ARCs), Banks, Financial Institutions (FIs) and NBFCs
  • One of the strategies for recovery of bad loans (NPA and Written off accounts held in Shadow Register) is for sale of Non-Performing Financial Assets to Securitisation Companies (SCs), Asset Reconstruction Companies (ARCs), Banks, Financial Institutions (FIs) and NBFCs.
  • The RBI guidelines on sale of financial assets (including Non-Performing Financial Assets) to Securitisation Companies (SCs) and to Asset Reconstruction Companies (ARCs) are given in Circular DBOD No. BP.BC.96/21.04.048/2002-03 dated 23.04.2003 (details given in Annexure–3A).
  • The RBI guidelines on sale of financial assets (including Non-Performing Financial Assets) to Banks / FIs / NBFCs (excluding SCs / ARCs) are given in Circular DBOD No. BP.BC.16/21.04.048/2005-06 dated 13.07.2005 , Circular DBOD No. BP.BC.97/ 21.04.048/2006-07 dated 22.05.2007 & RBI circular no: DBOD NO. BP.BC.34/21.04.048/2007-08 dated October,04,2007  (details given in Annexures–3B and  3C respectively). RBI guidelines/ instructions for sale of assets to Securitisation / Assets Reconstruction Companies are applicable from time to time.
  • The Bank will follow the RBI guidelines on sale of non-performing financial assets to SCs / ARCs / Banks / FIs / NBFCs and decision on all such matters will be taken at the Head Office end.