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.