NPA – The Enemy within
Non Performing
Assets – NPA in the banking sector or bad loans as they are commonly known have
become a huge pain area, especially for the PSU banks. Just look at the recent
media coverage on United Bank of India ..
A good
number of bad loan cases are the result of dubious promoters who know the loop
holes in the system, convince corrupt bankers, and political interference.
CRP
Technologies, a company based out of Mumbai since 2000, has recently started
helping some nationalized banks trace defaulting borrowers, through an
extensive process called skip tracing. CRP Technologies recently conducting a
training program on the process for some banking professionals using a case study.
The study demonstrated how the fraud could have been halted in the initial
stage itself had the manager who passed the loan had done a Risk check to the
property which was given as collateral.
Ambica
Communications takes a loan from a PSU Bank with three guarantors and four
properties as collateral.
Following
details were given to CRP
1.
Name
of the proprietor – Arjun Yadav
2.
Name
of the Guarantors - Arjun Yadav, Amit Yadav
& Nancy Dsouza
3.
Four Properties were kept as collateral
a.
ABC
shopping Complex – Owned by Arjun Yadav
- Son
b.
BCD Towers-
Jhui Nagar – Owned by Amit Yadav- Father
c.
LMO
Garden – Naigaon – Owned by Nancy Dsouza- wife
d.
XYZ
Farm- Virar – Owned by Nancy Dsouza- Wife.
CRP
conducted detailed investigations into not just the various companies, but also
the promoters and other related parties, and came up with some startling facts.
-
In
the company address given to the bank, the company did not exist.
-
In
the KYC documents given to the Bank – Xerox copy Ration Card- did not even have the name of Nancy Dsouza as
wife
-
Proprietorship
was converted into a Limited company, immediately after taking the loan.
-
ABC
shopping Complex – Owned by Arjun Yadav - Son. Was valued for Rs.2 crore. Loan
taken 6 crore
-
BCD
Towers- Jhui Nagar – Owned by Amit Yadav- Father was actually not even in any
of the promoters’ names. Valued at Rs. 60 lakhs. Loan taken 3 crore
-
Thorough
investigation also revealed that Nancy Dsouza had never been married to Yadav.
CRP
Technologies used this case study to conclude that to solve the problems of
existing NPAs, quality of appraisal supervision and follow up is critical.
Credit departments within will need to go beyond standard KYC (Know Your
Customer) procedures, and dig deeper to get the real picture. Like any other
risk process, credit management needs stringent entry criteria, to reduce
failures (defaults) later.
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