Non performing assets are a drain to the banks

ShriR.Koteeswaran

Chairman and Managing Director

Indian Overseas Bank

Central office

Chennai 600 002.

Dear Sir,

Father of our Nation has said

The past belongs to us but we do not belong to the past

We belong to the PRESENT

We are makers of the FUTURE

UTILISATION OF RETIRED IOBIANS IN NPA RECOVERY

FORMATION OF COMPETENT, CORE, CREDIBLERECOVERY TEAM

Non performing assets are a drain to the banks. Our bank under your able leadership is adopting various strategies to reduce the non performing assets in their banks and they are also adopting various methodologies by which further addition to NPA portfolio is minimized though there is no such ideal bank where the NPA is nil. But as far as our bank is concerned chronic slippages offsetting good work done in casa mobilization and recoveries. So there has been concern. There has been anxiety. There is a general feeling our Banks NPA is on the rise inconsistent with the good recovery efforts as could be seen from the performance review statement circulated during the Business Plan Conference of the Bank in which we had participated. These signs are unmistakable. IOB is in a pressure cooker situation. The heat and pressure within the vessel of NPA has crossed the safety limits and there is a danger of imminent explosion. If it is allowed to happen, it will be disastrous to all of us as we may have to face the ignominy of being classified as distressed bank.

The following traditional, theoretical strategies have been adopted by our banks trying to curtail non performing assets to a great extent:Recovery campsPreference of claims

Compromise proposalsTechnical write offOne time settlement schemeSuit filing: debt recovery tribunalsLok adalatsSecuritization act

BUT PRACTICAL EXPERINCE?Last year we should be frank is yet to see us in the brim of our efforts in our recovery drives as evidenced from the figures available of last quarter. .We would not like to go into the details for this sluggish recovery compounded with further new slippages, nor would we like to give excuses. We cannot be bad carpenters complaining about tools and instruments. But we have faith that that as in the past the combined renewed, resolute efforts of all staff members with the proactive initiative of union and officer association, healthy IR climate, continued social dialogue with the union and officer association by the top echelons on evolving strategies and will to recover can perform the miracle and pull the Bank out of the rut and get them going once again to the pre-eminent position.

The gap between theory and practice is visible. Today it our experience that Legal process is tardy and no tangible result is achieved in time. But there is no other go presently to Banks to settle disputes due to the adherence to age-old system. The legal options for recovery comprise of

Revenue recovery acts

Legal services Authorities act 1987 - Lok Adalat

Civil Courts

Debts Recovery Tribunal

Revenue recovery act is enacted to recover amounts to the banks borrowed for either Agriculture and / or Commercial purpose. This recovery made is not very prevalent.

Lok Adalat sits occasionally and the suits up to the value of Rs. 5 Lacks are decided by them. Delays are not brought down to effect quick recovery.

Civil suits once again are time consuming and do not measure up to the challenge posed by the huge NPAs

Debut recovery tribunals function from the year 1993 following Narasimham Committee reports. NPAs over Rs. 10 Lacks are dealt by these tribunals and in exceptional circumstance the limit can be reduced. The tribunals follow the summary procedure and are only guided by the principles of Natural justice. It is not necessary to indicate the procedure to be followed in filing the cases and process thereafter to recover the amount. It is suffice to state that these tribunals though created with much hope of reducing the quantum of NPAs, those hopes have been belied. Repeated adjournments of cases, willful dragging of the proceedings by interested parties, difficulties in executions of decree and above all limited number of tribunals cause much delay in delivering judgements and to implement the decree.

A concise note prepared in the Department of Banking supervision, RBI brings out in a detailed manner the extent of suit filing / Recovery etc., in banks. The note gives detailed analysis of position of NPAs in banks and discusses the ways and means to reduce NPAs both through judicial and quasi-judicial fora. Some important statements in that note regarding the measures taken and the result achieved are reproduced as follows: -

EXTENT OF SUIT FILING/RECOVERY Etc., BY BANKS

The data from 33 banks (27 public sector and 6 private sector) and the study of files relating to measures taken for recovery of suit by 15 banks reveals that banks do file suits after exhausting other means of recovery and the amounts involved in suits after exhausting other means of recovery, in the suit filed case accounted for insignificant % of these banks NPA.. The recoveries made out of suit filing by these 33 banks during the last 3 years were 7.33%, 4.74% and 4.32% respectively of the suit file amount evidencing decreasing trend of recovery through this route. In view of such meagre recovery, the banks before filing suit weigh the likely recovery prospects out of the suit and opportunity cost of any amount that could be recovered immediate. Suit filing, as such is resorted to as the last alternative. Further, as advances in "Sub - Standard" category due to temporary problems like slow moving stocks, delay in receivables, etc., or not always recoverable and some of them get regularised and upgraded to "Standard" accounts, the suit filing in such accounts is neither required nor resorted to. In view of the cost benefit implications and time factor in suit filing, banks consider legal measures only when the account is classified atleast as "doubtful".

EFFECTIVENESS OF SUIT FILING/LEGAL RECOVERY MEASURES IN BANKS

In some cases there were suits pending for 15-20 years, but no progress was made in the suit. Out of all the suit filed cases of Rs. 1 Crore and above studied in 15 banks which were visited, there was only one case in which the suit filing was taken to logical end i.e., execution of decree, recovery as per decree and closure of the borrowal account.

TIME TAKEN FOR SETTLEMENT OF SUIT

In the light of the above the issue that needs deliberation is that despite banks resorting to filing of suits in NPA cases constituting 48.27% of the NPAs, even as a lost resort, whether the legal process beneficial in recovery of dues of banks and enforcement of credit discipline and if not, the measures that could be taken for making this process an effective tool.

DEBT RECOVERY TRIBUNAL

A data though old speaks the ground realities of the situation states at the end of June' 1997 out, of total number of 11,700 cases filed and transferred to DRTs involving 8,866.67 Crore only 1,045 cases had been decided and a meagre amount of 178.08 Crore was recovered.

The data suggests that the working of DRTs had fallen short of expectations by not creating a fast track system for recovery of banks dues. Banks are of the view that so far the constitution of the Debt Recovery Tribunals has not contributed substantially in recovery of problem loans/ enforcement securities by the banks, as they are not equipped with proper infrastructure and required flexibility. Therefore immediate need for removing all the impediments coming in the way of smooth functioning so as to make it play the role expected of it.

CONSIDERING THE PROBLEM IN REDUCING NPAs THROUGH LEGAL PROCEEDINGS THE RBI NOTE CONCLUDES AS FOLLOWS

Reduction of NPAs in banking sector should be treated as a national priority item to make the Indian banking system more strong, resilient and geared to meet the challenges of globalization. It is necessary that public debate is started soon on the problem of NPAs and their resolution. It is hoped that our sincere submissions in this letter will provide a base and generate a healthy public debate, which may be helpful in evolving suitable strategies for satisfactory solution of the problem.

The issue that needs deliberation is whether it could be concluded that the high level of NPAs is historical legacy mainly due to lacunae in credit recovery system, largely arising from inadequate legal provisions on foreclosure and bankruptcy, long drawn legal procedures and difficulties in executions of decrees awarded by the court. In the background of the above remarks of RBI the fittest measures for reducing NPAs is to be examined. In this connection the report of the various committees set up for recommendations for improving the working of the banks may assist.

Pannir Selvam Committee Report submitted in 1998 on NPAs of public sector banks suggests Arbitration/Conciliation under the Arbitration Act 1996 as an effective tool.

Some of the observations made in that report in this connection are extracted below.

The Pannir Selvam Committee has pointed out that main reason for growth of NPAs and slump in recoveries in banks in India is the antiquated legal system and the laws prevalent in the country. Thus according to the committee unless the legal system in the country is thoroughly overhauled/ reformed it would be increasingly difficult to tackle the NPA problem. In contrast, banks abroad have been able to contain their NPAs because of quick disposal of litigation by their judicial systems to release their dues.

The committee suggests various measures to strengthen credit monitoring by setting up special recovery cells placing persons with credit management skills in branches having sizeable NPAs, and intensive follow up of sub - standard assets for the upgradation. It further suggests periodic meetings with borrowers, constitution of special recovery teams, exploring possibilities to quickly get the account adjusted by compromise/write off. Provisions have been made for doubtful and loss assets, obtaining additional security to strengthen loan asset and reduce the provision requirements. The committee strongly recommends to make the Arbitration act 1996 to be made applicable to banks. Compulsory Arbitration by senior Retd. Judges or Ex- ED/CMD of Banks / FIs is advocated before reference to high court /DRT.

The non-legal options for NPA management mainly compromises of dispute settlement. Compromise as an option is attractive when the bank and promoter are willing to negotiate and settle an option where there are gains to both parties. This method is used by our bank in a selective manner depending upon the strength and weakness of the banks vis--vis other options. Tardy legal system if resorted may causes heavy delay in recovery by which time the mortgaged assets may loose their value or the interest earned on money recovered may compensate loses if any by the delayed Judgement by judicial fora.

Negotiated settlement appears to be a reasonable solution, which can bring down NPAs in short span of time. Our Banks ahs increasingly used this approach for debt recovery. Probably the RBI and apex body of the banks may have to issue necessary guidelines to take recourse to this method extensively. But it appears there is still mind block to utilize this time-tested method.

As Bankers we do not fear to negotiate but they do not negotiate out of fear. Vigilance checks and apportioning accountability of managers on unrelated grounds causes fear and the managers drive the promoters to legal courts or the bank themselves initiate legal proceedings.

To avoid long drawn litigations quasi-judicial proceedings may be a proper answer. It was expected Arbitration and Conciliation proceedings by experienced Arbitrators and Conciliators will not only ensure quick disposal of recovery cases but also avoid fear psychosis of the bank managers. Decrees passed in Arbitration or compromise settlement arrived at in a Conciliation proceedings are decrees of a court under the Arbitration and Conciliation Act 1996. Hence this process of recovery settlement was encouraged instead of depending upon legal system, which has serve limitations.

In our country the agencies acting for arranging Arbitration/ Conciliation proceedings effectively are few. These agencies are also run under the control of Govt. institutions like ICADR and Arbitration tribunals. They do not attract many clients. Even in those institutions the delays can not be ruled out due to various reasons. Then what is the solution? The only remedy appears to be to encourage our own retired employees to arrange for Arbitration / Conciliation adhering to the Arbitration and Conciliation Act 1996 following their own procedural rules. Experienced retired employees equipped in all respects sanction of advances and recovery will deliver the goods of early recovery of NPAs with earnestness and with gains to both sides.

With this objective the undersigned had series dedicated meetings of handful of retired IOBIANS, irrespective of their membership in any of the retirees associations in our bank at Mumbai, in the month of JULY 2013. in one such meetings the undersigned presented the following paper Strategies for effective NPA recoveries which itself is the by product of various informative articles by competent experts on recovery interwoven as effective grid model to identify the pulse of NPA parties and evolve suitable strategies to approach them strategies. STRATEGIES FOR EFFECTIVE NPA RECOVERIES This research and the findings, to our belief, will be very useful for OUR BANK to adopt specific protocols for recovery of the NPAs in their books.1. IntroductionEvery strategy emanates from the market and market itself evaluates it over a period of time. Wartime experiences encourage development of new tools and techniques. The banking crisis which started from late 2008 was nothing less than a war where banks were struggling to survive.In cluttered conditions like above, Banks had a tough task of reducing / recovering the current NPA levels and at the same time address the increasing flow of good credit becoming bad. Resolution of NPA means an exit from the asset through total or partial recovery of NPA, with or without external assistance from Asset Reconstruction Companies (ARCs), Debt Recovery Tribunal (DRT), Corporate Debt Restructuring (CDR) or other legal proceedings. Our analysis on different cases, which comprises of NPA in our own bank ,based on my experience in the board of directors for two terms and subsequent experience of other workmen nominees share to me with different types of company working on distinct Business grid, ahs provided the impetus to this new theory of grid proposed by us . . Here we propose a grid which can be well used as a protocol to be followed for NPA resolution. The focus of my paper is not to clean the books by divestiture or swap of NPAs, but to recover the NPA 2. Literature ReviewThe researches in the field of NPA are quite nascent. The papers have been limited to providing a trend in NPA over the years. A research work by Justin Bert(2009), vice president at Capstone Advisors on topic Developing an Action Plan for Non-Performing Assets have tried to set up measures in place to check lending in sub standard loans which leads to bad debt. This paper has put forward ideas of judging asset quality and detailed legal review. However, this grid doesnt take into account that, NPA cases emerge out of many different reasons and not only because of operational inefficiency. Prashanth K Reddy, in his paper A comparative study of Non Performing Assets in India in the Global Context- similarities and dissimilarities, remedial measures explained the formation of NPA in Asian countries. However his analysis was focussed on the problems of judiciary, polity and bureaucracy and hence the solutions proposed were for amendments in regulations. In his paper named Resolving Non-performing Assets of the Indian Banking System He Dong from International Monetary Fund have enlisted the best practices to be adopted to help AMCs(Asset Management Companies) meet the need of resolving NPA in banks. This is a descriptive list with a narrow focus on AMCs. There havent been many efforts to explain and optimize the recovery process of NPA. This is where we have put our thoughts to present a grid, which takes care of the same and explains approaches to reduce the hassle and risk of losing bad debt and customers. In our analysis we have found that there can even be lot of collaborative approaches to NPA collection.3. Pre Sales AnalysisIn banking industry, the Collection team professionals face huge impediments in meeting their KRAs (Key Result Areas). If you go by the analysis of Non Performing Asset (NPA) accounts, the blame could be easily passed on to the marketing team. However, a contrary view might be that its due to the over-ambitious sales by the banks that the recovery experts are enjoying all importance in the lending business industry. Bankers often follow the policy of "Sell and forget" since the account is believed to be converted and will be there till any major problem creeps in. Staffs get really desperate, to the point where they will convince customers they need something when they really don't. The sales targets lead to many corrupt practices like opening up an account and closing it the next day to make sure that the targets are reached. For the customers, it becomes difficult to understand whether the suggestions made are based on their needs, or the agents job security or a bonus. The Banking services, being a specialized service industry, personal selling is the way banks prefer in expanding the sales. Personal selling in banks takes place in two ways. Either the customers and banker perform interaction face to face at branch office or the bank personnel (the customer representatives) go to customers place. Customer representatives are meant to be specialist in financial services to be offered and they shape the relationship between lending institutions and customer. But many companies adopt Hard selling way whereby they hire sales person with least knowledge of the services and rely on their efforts and convincing skills to win customers. This leads to customers subscribing to facilities which they really don't need. However, the recession of 2008-09 made us go back to the drawing board and rethink our strategies primarily pertaining to follow up with the customers. This can undo the damages which Push sales would create.Now that we claim the crisis is over, we say it's just a beginning, where lot of gear shifts will be required. Running at controlled speed to grab the green shoots at the same time being wary of falling in same trap again would help to ward off the crisis faster. The learning curve for the last few years in this industry has been very steep. The credit goes to the quick learning in the face of recession and the resilience shown by many banks. We have seen lending institutions using innovative ways of resolving NPA. Resolution of NPA means an exit from the asset through total or partial recovery of NPA, with or without external assistance from Asset Reconstruction Companies (ARCs), Debt Recovery Tribunal (DRT), Corporate Debt Restructuring (CDR) or other legal proceedings. Leads should not be lost while the customer is transferred to a new team.Though the lending institutions seem to be running on most conservative lines and lending to the safest customers, it turns out to be a misleading notion when seen in light of business knowledge of their clients. The standard process of following the Gearing ratio, balance sheet analysis and cash flow test should be in addition to non-financial check points for the customer. The financial indices cannot capture the intent of the promoters and their expectations from the company. The constitution of the company plays a very important part in ascertaining their intent and avoiding fraudulent customers. Once the prospective customer stands tall in these checks, its business model, industry and average profitability becomes important. A credit analyst needs to map the company on Michael Porters Value chain, which can reveal the strength of company. Apart from this, the following table lists the major industry wise checkpoints for Business Model of clients:Checkpoints for Business Model Strength in different industryIndustryCheckpoints for the Business Model

PharmaceuticalsInvestment in R & D.

FMCGDistribution Network is developed/ investment required. Competent Distributors.Integration of its Supply chain

Trading & shippingValue added to product/service at its end. Profit marginInfrastructure in terms of warehouses, ships.

TransportationNumber of Trucks owned/leased. Transport permits

Wood and TimberLegal approvals for cutting trees.

Perishable commodityCold storages in placeEfficient distribution Network.

TextileInvestment to build a brandBrand strategies for differentiation

RetailThe Rental cost.The value addition and value capturedBrand recall.

ChemicalQuality check proceduresISO Norms and regulatory bodies.

Note: we have not included priority sector lending and agriculture which are aimed at financial inclusion where recover through existing procedures have yielded satisfactory results. The above parameters are hardly taken care of by the bankers. The facilities and limits are decided upon by fixed templates provided by their back office. Another most influencing agent in their decision making happens to be the target for the month/quarter. The visit to debtors and physical verification are often compromised. Thus the huge increase in NPA and increase in problem loans linked to commercial activity and commercial real estate was not only due to macro economic reasons.]4. Post Sales Issues & NPA Recovery GridThe figures of NPA levels has a direct impact on profitability of banks and hence stability of economy. Huge amount of credit got trapped for building provisions for Bad loans during recession for most of the banks. As a matter of fact, due importance has been given to reduction of NPA by regulators of most countries. Still recovery is one of the most challenging tasks in banking. Lending institutions often employ barely legal methods for recoveries (K R Sreenivas, S Shyam Prasad, 2010). The lending institutions employ relationship managers for handling each customer separately. All efforts are taken to retain them. But often this relationship is based on the amount of business they bring to the company. Seldom is the customer profiling done on the basis of risks they pose and taking dynamic inputs from the relationship managers. In troubled times this becomes increasingly important. The recovery teams often increases the customer follow up which becomes counterproductive. Strategizing a recovery process is paramount and following the NPA recovery grid would aid the process.The grid is based on two decision-making parameters: Commitment from customers and co-operation from customers. These are most pragmatic parameters to be used by recovery agents to understand their clients and differentiate cases. The customer is placed in one of the below quadrants based on their co-operation level and actual commitment shown in making payments. The judgments on the parameters should reflect the current state of the asset and the customer. Profile and track record of the customer can also be considered for this assessment. Before categorizing the customer into one of the quadrants, the recovery team must have some experience with the customer or should have sufficient data justifying the co-operation & commitment levels. The relationship managers of the company defaulting can based on his judgement classify the company in four quadrants too. Timely review of the cases can be done justifying their classification. The NPA Recovery grid is applicable as long as legal proceedings are in place and ongoing or if they have not started at all. If there were an outcome in the court the grid would obviously be of no help. The NPA recovery grid is also sensitive towards the kind security in place for the loan given to the client. A lending institution having taken good security for giving loan and operating in a country having faster effective legal system may not have need to use this grid. In that case, bargaining power of the lending institution will always be much higher and can make any customer accept their terms. The applicability of the NPA Recovery grid will be more when legal proceedings takes lot of time and the lending institution holds less security (or unsecured loans). NPA recovery Grid has been explained by considering examples from Small & Medium Enterprise segment. The Grid works well within the boundaries of this segment. However, since the grid deals with human behaviour and integration, it can be used in all categories, be it Global corporate or large local corporate. Timely review about companies can be taken to ensure change in quadrants and thus change in strategies. Figure- 1 NPA Recovery GridCommitment from Customer High Low Low High Co-operation from customer Collaboration The set of customers, who are willing to collaborate with the bank are positioned in the first quadrant. They are high on co-operation as well as commitment. They do entertain all the calls and meetings initiated by collection departments of lending institutions. Collaborative customers accept their liabilities and are willing to go extra mile to pay off their debts. Mostly, the dates decided with the lending institution for repayments are honoured. More often than not the companies have defaulted on the loans due to a rare economic downturn or a big setback on adopting a wrong strategy. Usually such companies have market goodwill and plan to continue operations after payment process, which give them motivation to repay quickly.Strategy for collaboration - The lending institution should break customers outstanding loans in various tranches as against asking them to repay entire amount at one go. Bank should ensure customer accepts a written undertaking or accepts a memorandum of understanding specifying the same. The lending institution should put efforts in helping customer settle a credit by extending their due dates if a particular tranche of payments are being delayed on one off basis.- Lending Institutions should also make the payment process smooth by ensuring enough room is given to customer to conduct the business activities, as the repayment may only come through the same. Lending institutions should not press the panic button on default as that may lead to misunderstanding with the customer. Lending institution and defaulter on same page is the best possible situation. The recovery process gets very difficult when they are operating on different pages. Banks should do what is takes to ensure the customer is collaborative and stays that way.- Lending institutions should collaborate with these types of defaulters in real sense like helping them sell off their sick assets, which would be channelized to settle the NPA. Lending institutions can also try and aid customer in disposing off the excess finished goods, the customer may be sitting on.- Lending institutions should minimize the calls done by collection agents & also slow down on legal proceedings here. Lending institutions should refrain from hiring external collection agents and use on payroll professional for recoveries here.Example 1 ABC Textiles: This Company was into manufacturing garments and the NPA resulted due to issues in textile industry downfall (2008 09 recession of world textile industry). They approached their bank and rolled out a plan for settling the full amount. A NPA of worth USD 2 Mn was settled in course of 9 months. The loan was unsecured. According to the exit strategy agreed with customer, every 15 days a payment was to be made by ABC Textiles, which was always honored. The bank promised to withdraw the legal case on receiving the last tranche of payment. Bank also allowed ABC Textile to undergo normal business activities and agreed to meet them only when ABCs customers were not around. Further, the Bank also promised to give the customer a Conduct certificate stating entire recoveries have taken place within a day of full recovery to facilitate them in receiving new working capital. If the bank had tried to mandate the customer in paying them USD 2 Mn immediately, customer had to probably shut down the business operations. In all possibility nothing would have been recovered then (Bankers who had taken security and lent to ABC Textiles would have claimed their fixed assets) Bank also had let know the customer through the process that they reserve the right to increase the activities of collection agents & legal proceedings if the collaborative approach by customer was let go off.Example 2 XYZ Foods Pvt Ltd) was into export of processed foods and vegetables with100% export oriented units. Due to export slump and material rejection, the company defaulted with the bank. The Company had well experienced promoters who approached the bank for help in selling off a sick sister concern, thus aiding them in tiding off the capital crunch. The bank went forward to the extent of providing advisory services for the purpose thus working towards a win-win situation.Two Face Attack:Figure 2: Two Face Attack strategy

There are many customers who appropriately entertain all calls from the agents and keep up to all the meetings to discuss recoveries. They are cooperative in talking to lending institutions. But they dont honour most of their commitments of repayments. They will miss the commitment dates regularly and often come up with multiple reasons for the same. These customers should be exposed to two faces of bank a resolute one and a co-operative one.Two Face Attack Strategies:- There should be two points of contacts from the lending institution for the defaulted customer, either two individuals or two separate teams. One of the individual / team should approach the customer with the aim to understand all latest developments and how it may affect the repayments. Efforts should be put to ensure customer commits repayments of loans by specifying some dates where in part/full payments can be given to the lending institution. All these insights of the customer are shared with second agent/team, who would be working in conjunction. This second person/team would be working to push the customer in meeting the commitments. Without the necessary push, these type of customers would have tendency to take leeway and dishonour dates of repayments.- The second team / individual would play an important part in the whole process by ensuring regular meetings with the customer are conducted. Activities of meeting customer and constantly being in touch will increase many folds when the commitment dates are near. This team may take help of external collection agents who are specialists in follow-ups.- Whilst the first individual / team are seen in positive angle by the customer, the second one will not share the same place. However both faces would be required to complete the recovery process together. Both individuals / teams will have to work on-going basis whereby one person/team makes the customer to commit while other will ensure that commitments are kept. Care should also be taken that customer puts in writing all the commitments.- Parallel to influencing the customer for new payments, the first agent should also try to ascertain new ways to collaborate with the customers. The proposals forwarded should pose win-win solution for both the party. This would shift the customer to the first quadrant i.e. Collaboration and thus simplifying the whole process.- Recovery process here may take a long time but continuity is the key.Example 1- Medial Prints (MP) used to deal in various types of printed plastic and bin bags. During the recovery process the promoters of MP use to always pick up call and share the problems of credit flow to agents. They would always commit but very rarely they would meet commitments. These insights were gained by one of the agent who patiently gathered maximum information regarding certainty of payments from the customer. Then another agent from the collections would approach the customer multiple times before the payment dates to ensure that customer doesnt go back on commitments. Initially when the second agent was not introduced, customer would not pay to the bank sighting credit crunch as the reason but would keep on spending on expensive cars. The two-face attack approach helped to recover most of the outstanding. Silence There are yet another group of customers who feel uncomfortable with the phone calls and meeting recovery agents/ bank employees. They certainly dont believe in collaborating with the bank and request a Do Not Disturb from bank side. However they keep their commitments and make the payments on date, as per mutually agreed plans. Just like collaborative customers they accept their liabilities and will be willing to go extra mile to pay off their debts. Mostly, the dates decided with the bank for repayments are honoured. More often than not, just like Collaborative customers they defaulted on the loans due to a rare economic downturn or a big setback on adopting a wrong strategy.Strategies for Silence Customers:- For these customers Less is more. They should be left with the payment plans with least of follow up from the agents side. Collection calls & regular follow-ups with customer may upset the customer and upset the repayment rhythm. However the continuous assessment must take place and if the commitments are not being met then this strategy has to be replaced with two Face attack.- Occasional meetings / phone calls may suffice as customers commitment here.- Option to move the customer from Silence to Collaborative quadrant should be explored.- Legal proceedings should be kept at minimal as the same can upset the repayment activities of customer as such customer can quickly go on bad note with the bank.Example 1 ABC Foods, was a pioneer of 'Ready-to-Eat' Snacks, an established brand in potato chips manufacturing in Asia. They were also into exporting a wide range of snacks. The company was keen on not receiving any calls or pushing from agents and promised few deadlines for payments. Initially a two Face attack was adopted which got the company into wrong foot with the lending institution. For 30 days nothing came out of the strategy. Then a joint call with the customer was taken to go on with the Silence strategy i.e Bank will not follow-up with the customer for the payment, except for once in a week (Every Friday evening). Customer will repay on weekly basis. Customer missing one or two deadlines will not tantamount to bank switching over to two Face attack again. But the moment customer misses the third one; bank will have option to expedite activities with respect to legal proceedings & re initiate follow-ups by lending institution. The customer agreed upon this strategy. The customer accepted a written confirmation of the same. This ensured the bank recover all its outstanding along with interest payment, which was 15% of the size of facility.Dead:Figure 3: Dead strategy

A customer with no co-operation with recovery agents and also giving no commitment for repayments are placed in this quadrant. A defaulting customer should only be pronounced dead for recovery after considerable amount of time & effort has been spent towards the same. When all efforts of transferring the defaulting customer to any of other quadrants fail, the customer may be put under this category. Usually intentional fraudsters lie in this category. The promoters may have no intention to carry on operations of the company going ahead. Sometimes the lending institution may even have to trace the missing promoters altogether. Business associates of defaulter lying in dead category may deny links with the defaulter to protect themselves. A default company lying in this category may have defaulted with multiple lending institutions.Strategies for recoveries for a DEAD customer:- At any point if there arises an opportunity to move the defaulter to any of the other quadrants, the chance should be grabbed with most sincere efforts from the collection team. Offering waivers to customer on outstanding loan amount (subject to rules, case to case basis) can be one of the ways in which lending institution may try to make customer co-operative.- Legal proceedings, collections by agents (external & Internal) would be at highest level here. Lending institution on due course may be able to recover some amount on liquidation of assets if the loan is against a security.- In cases where these efforts dont materialize, the customer should be approached for a one-time settlement (OTS). In these settlements, a higher waiver ranging from 20-50 percent can be given (based on parameters / rationale existing case to case). However, in many cases, the customers dont respond to any communication and try to escape any kind of payments. In the end, when OTS doesnt work out, the exit strategy should be to sell these assets selectively to an Asset ReconstructionCompany (ARC). These companies buy a portfolio of assets at a certain percent of the value of portfolio. They are specialized in reworking the assets to make out maximum from the bad debts (Simon Mundy, 2010).Example 1 XYZ Pharma drugs Limited (MPDL) faced immense problems due to finished products getting rejected by their client. MPDL availed a USD 1 Mn unsecured loan from a bank. When agents started calling for overdue, the calls were not entertained. The employees also stopped co-operating. Multiple trials to establish contact with the customer did not yield anything substantial. Simultaneously, the case was filed in court. Legal proceeding was left to take its own course. Later on, the promoter was found to be already behind bars. Many banks having lent to the customer after taking security were already after the customer & the fixed assets. After 2.5 years, Unsecured Bank had to sell the asset (loan to Company) to an ARC company at around 3 to 4 percent of its original value. When secured lenders were struggling to recover, there was no possibility for an unsecured lender. The lending institutions also had to decide on the time they can afford to keep the debt portfolio in their books or how long they can keep expensive resources chasing DEAD categorized clients..

Any NPA bears a direct impact on banks liquidity, profitability, equity and its operations. Though the risk analysis, accounting for NPAs and ratio analysis for lending are quite developed subjects, the researches done on NPA recovery gives a clear indication that it has not grabbed enough attention of strategist. This paper attempts to provide strategies which could improve and standardize the NPA recovery process. Our proposed decision making grid can be used as a modus operandi across all branches of banks to remove the mayhem which prevails in this unorganised function of highly organised lending institutions. This grid emanates from the learning of a large number of live cases which makes it indirectly tested.

With this pellucid understanding we suggest the following strategies I suggest the following steps to give thrust towards Utilization of Services of experienced , competent credible Retired IOBians On the participants who is taken in the panel of by the bank as Recovery agent who has done certificate course at RBI suggested engaging retired Iobians and using their services for productive purposes by way of outsourcing and rendering various services to I.O.B. for mutual benefits. And for recovery of banks impaired assets. I have already executed contract agreement with the bank. Other participants who have contributed their mite to substantial recoveries during their service tenure resolved undertake this job with all seriousness professionally. Accordingly we suggest the bank to avail services of interested retirees on banks approval We have plan to undertake this job at all India level with your cooperation to make positive impact on recovery of banks impaired assets. For this purpose, there are a couple of pre-conditions prescribed by RBI /IBA/IIBF etc. DRA or its employee / assistants must undergo 100 hours training and pass certified examination conducted by IIBF. As retired banker 100 hours training is not necessary, it may be made to minimum by taking up with RBI/IBA/IIBF. Moreover, this training may be imparted at our training center free of cost and cost of examination fees about Rs.1250/- may be absorbed by the bank. There is also one more condition of tape-recording of conversation with the borrower. I believe that generally this condition is not observed by Debt recovery agency and the same may be waived since those who will be taking up the job will be having clean and unblemished service record.

Apart from the above, in collaboration with the bank various other jobs can be undertaken by retirees at all India level which will benefit the retirees with reasonable revenue earning and the bank will be benefited in a big way.

Retiree organization/Association must prepare a list of retirees indicating their past banking experience and potential and keep updating every month as more and more retirees will be added up and a few may opt out due to their own reasons. From the available list, association must short list only those retirees center/city wise and who had unblemished service record, willing to work can take up the job assigned by the bank in the area near by their residence. With available list of eligible/willing retirees, the association may approach bank and request for out sourcing various jobs and thereby relieve the regular staff for some other more important and productive purposes. In pursuance of the above noble objectives we suggest that bank to entrust the activities to the pool of retired employees as suggested above 1. Collecting and verifying various documents which are a must for KYC compliance as per banks guidelines. The same will be further scrutinized by banks official for his satisfaction and approval.

2. Bank pays no interest on current account and pays interest at fixed rate in SB account half yearly. If CASA deposits canvassed by the retirees, bank should pay half percent interest amount as commission every half year. This incentive will encourage the retirees to canvass good and quality CASA accounts wherein substantial balance would be maintained rather than opening unproductive CASA accounts.

3. In retail segment, loans canvassed by the retirees to satisfaction of the bank should pay quarter percent interest amount as commission per annum on all performing assets canvassed by retiree till such loans are liquidated.

4. Regularizing the watch category and sub standard NPA accounts with charging penal interest and recovery, the bank must share one percent of interest with retiree as incentive.

5. As regard to doubtful and loss assets accounts, it must be entrusted to Debt Recovery agents on panel (necessarily ex-staff) for recovery, OTS, SARFRESI action by utilizing best available staff and commission may be paid as per the circular issued by the bank to that effect.

6. Bank should pay quarter percent interest amount as commission on short term deposit below one year for of amount one lac and above and 0.1% on bulk long term deposits above rupees twenty five lacs for period one year and above

7. In big centers like Mumbai comprising of about 70 branches ( Mumbai I & II regions ),the old records can be kept under one roof, saving costly space occupied in the branches for record storage. The centralized storage may be identified in outskirt of city at much lower rent. A comprehensive proposal already submitted to RO Mumbai-I in this regard.

8. Banks training college/center faculties can be outsourced from experienced retirees

9. Inspection of the branches and concurrent audit also can be outsourced from the retirees

10. Computer stationary can be procured directly from the manufacturers for all India consumption and supplying to the branches by utilizing the services of retirees. The cost of computer stationary for huge consumption will be brought down substantially and thereby bank to benefit in a big way.

11. Table stationary can be purchased for all India consumption from whole-sellers and supplying them to all branches by utilizing the services of retirees. Again bank to gain by substantial cost reduction. 12. Retiree messenger/sweepers services may be utilized in absence of regular staff on leave/long-leave, etc.

13. Courier mails from one center to another centers can be made in one lot and get them delivered to respective branches through CBO centers using the service of retirees..

Many other similar services can be identified and delivered in professional way which will be beneficial to both bank and retirees.Other suggestions :SETTING UP CENTRALISED PROCESSING CENTRE(CPU) BARCODING OF ACCOUNT DETAILS IN CHEQUE BOOKS

Data entry of account number at the time of processing a cheque can be eliminated by bar-coding account number. This requires issuing of cheque books centrally after receiving a cheque book request from a branch. It also requires transfer of cheque request from branch to central place The Bank comes to know of change in address if any from the Customer (updated information).

MIS-REPORTING

The number of statements to be generated by the branches classified under DAILY (6), WEEKLY (1), FORTNIGHTLY (4), MONTHLY (78), QUARTERLY (42), HALF YEARLY (14), YEARLY (11) is high. Considerable time is spent by branches on these statements. In CBS branches IF done centrally it will help Branch functioning.

The retired employees after selection along with contingent of regular employees both officers as well as clerks will carry out these activities in CPU in lieu of outsourcing :

(i) Outward & Inward clearing

(ii) Encoding of Cheques

(iii) Loan Proposal Processing above a thresh hold value.

(iv) Cheque book issuing after bar coding account number and dispatch to customers directly Customers address can be updated with every request of cheque book if there is a change.

(v) MIS reporting of CBS branches.

(vi) Monitoring of A category Advances.

(vii) Preparing, Paying & Dispatch of Tax deduction at Source certificates for Interest on Deposits. This will require fewer Officers in the Branch premises during Customer Transaction time.

(viii) Monitoring of NPAs and initiating steps for upgradation and recoveries by maintaining continuous communication with clients.

(ix) Monitoring of inoperative accounts and initiating steps for upgrading it as operative by sending reminders to clients. For this purpose the task may be entrusted to retired staff members if necessary. However letters to clients should be sent through Central Processing centre only. Thus officers can devote more time to outside the branch premises official work such as recovery.

(x) Maintaining liaison with potential clients and NRI clients by maintaining continues communications with them.

(xi) Sending greeting cards, good wishes letter, thanks giving letter, new product information, conveying other achievements of the Bank etc, to potential clients.

For the aforesaid purposes sub hubs may formed for carrying out specific role functions. Adequate manpower( both retried and regular ) should be arranged for carrying out these task in the Central Processing Centre described above CONCLUSION

We trust that the above suggestions, will considered by the Bank objectively in pursuit of reaching pinnacle of excellence in the banks business growth. We note to add further suggestions, wedded to the principles of Kaizen continuous improvementsWe believe in the firm conviction that The future never just happened. It was created. But we also know that we live in a world of change, and we cannot act on the basis of continuity. Our creation of the future depends upon how correctly we anticipate the change and prepare ourselves for it.

We are aware when writing these lines that at this very moment, few staff matters remain to be solved. But it is also a fact that any trade union of our size will have at a given moment some problems awaiting solutions. While we shall be devoting our attention to them simultaneously, we shall not be found guilty by posterity for having tried to bargain for our ends in a unique way.

But we have immense faith in our the best work force, our devoted and committed soldiers who have all the potential to make IOB acquire and attain the first place in all respects. The will and determination we have often exhibited and spirit of resilience will transform into fully into result oriented actions.

For us commitment is action and not a mere empty word ,.

"Arbitrate - don't litigate' is todays slogan for quick and profitable reducing of non - performing assets by banks.

"Vision without Action or Action without Vision" leads no where. "Vision with Action" is the solution for achieving success. Vision of reducing the NPAs combine with action through Arbitration / Conciliation through our own staff retired or serving is the best solution available to the banks for recovering the dues from borrowers. This time tested method through private agencies is to be encouraged by Government to achieve viable and quick results

Accordingly we suggest that a meeting of apex level leaders of union, officer association and retirees association be called at Central Office followed up by at big centers like Mumbai, Chennai, Delhi, and Kolkata, etc. and call for suggestion to strike a deal at organization level both by the bank & the service providers i.e. management committee of retirees to build core, competent, credible teams of recovery agents/support staff from in-house human resources comprising of regular and retired staff . .We look forward for your early and positive response in the matter to move it to the next level.

Awaiting your just response

Assuring of my cooperation and support at all times

Yours faithfully

S.SRINIVASAN

(S.SRINIVASAN)

Retired bank unionist 19-07-2015

Published in the interest of Hailing successful 46 years of Bank Nationalisaion

Success of nationalization depends on the dedication we show in our every task.

SILENCE

COLLABORATION

DEAD

TWO FACE ATTACK

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