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Management of NPAs in Indian SCBs: Effectiveness of SARFAESI Act, DRT & Lok Adalat during 2004-2011
Siraj. K.K, Research Scholar, School of Management Studies, CUSAT Prof. (Dr). P. Sudarsanan Pillai, Research Guide, School of Management Studies, CUSAT

Abstract
NPAs exhibit a virus effect on banks and affect liquidity, profitability and performance of banks. At macro level, NPA affect stability of banking and leads to financial shocks in economy. The post-liberalization period saw remarkable changes in Indian banking sector, deliberated to improve efficiency and to align Indian banking with international standards. The research evaluates the management of NPA and explains the effectiveness of various recovery management measures in Indian Scheduled Commercial Banks (SCBs), in particular DRT, Lok Adalats and SARFAESI Act during 2003-04 to 2010-11.In addition to descriptive statistical tools, correlation and regression study is undertaken to evaluate and explain relationship between incidence of NPA and its recovery of NPAs. The empirical results showed improvement in recovery of NPA contributed mainly by SARFAESI Act and DRTs during the period. It may be observed from the study that SARFAESI Act provided much needed momentum to recovery management. Keywords: Non Performing Assets, Priority Sector, Non-Priority Sector, DRT, Lok Adalat, SARFAESI Act.

1. Introduction
Banking sector reflect the growth of economy. The intermediation function of banks channelizes savings into productive purpose in so doing promotes economic development. Thus, a stable and efficient banking system is indispensable for supporting the development initiatives of the economy. Siraj, and Pillai (2011) noted that development of banking sector and its stability is essential for the overall development of the economy. Banking crises often led to financial crises and economic distress in many economies. Since the primary function of ISSN: 2249-9962 April|2012 www.ijbmt.com Page | 1

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banking involves lending, the element of credit risk pervades and requires proper attention to mitigate with. Credit risk is inherent in banking and results in bank failures. If not managed properly, credit risk results in the accumulation of bad loans, commonly called as Non Performing Assets (NPAs). Tracey and Leon (2011) observed that the basis of sound credit risk management is the identification of the existing and potential risks inherent in lending activities. The stability of banking sector is determined on the basis of its performance and quality of assets. Non Performing Asset (NPA) refers to an asset that ceases to generate income for the bank or a credit facility that does not meet its repayment obligations as agreed upon by the borrower and lender. In other words, NPA is a credit facility in respect of which the interest and/ or installment of principal has remained overdue for a specified period of time, i.e. for a period of 90 days (updated with effect from March 31, 2004). NPAs exhibit a virus effect on banks and affect liquidity, profitability and performance of banks. At macro level, NPA affect stability of banking and leads to financial shocks in economy. NPA is considered as a major reason for bank failures (Estrella et al, 2000; Chijoriga MM, 2000; Ahmed et al, 2007). Santoni et al (2010) on bank failures in US explained that the real component resulting from exposure to a high loans/assets ratio, combined with a heavy accumulation of NPAs: 90% of the banks that failed in the U.S. in 2009 had a high level of NPAs (over 4.7%). In India, NPA is regarded as one the most important cause of many bank failures. Some banks exit to destiny (Ex: United Western Bank), while some other banks merged (Ex. Lord Krishna Bank reported ratio of NPA to total assets over five percent in 2002-03) with other banks, since affected by high level of NPAs. NPA is unavoidable in banking because of the basic nature of the business of banking. The inevitability of NPA in asset portfolio of bank prompted policy makers to introduce various recovery measures in addition to proactive measures to restrict NPAs growth in banking. Banking across the world integrated various recovery management measures that suit their legal and economic environment. This research brief on NPA recovery management practices and appraise whether the measures were efficient in bringing down NPA of SCBs in India. Specifically, this research investigates role of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act), Debt Recovery Tribunals and Lok Adalats in NPA recovery management. Non Performing Assets may be further classified into NPA from priority sector, non priority sector and public sector. Priority sector includes agriculture, small scale industries and other priority sectors. Attempt is made here to evaluate the significance of relationship of these different sectors of NPA and recovery of NPA.

2. Literature Review
In Indian banking, the accumulation of NPA and its impact on profitability and asset quality received attention during 1990s. Financial Liberalization is considered as important requirement for financial sector growth. Financial liberalization covers various dimensions of financial sector that as noted by Shehzada and Haan (2008) includes measure relating to (i) credit controls and reserve requirements, (ii) interest rate controls, (iii) entry barriers, (iv) state ownership in the banking sector, (v) capital account restrictions, (vi) prudential regulation and supervision of the banking sector, and (vii) securities market policy. To revive Indian Banking and promote a viable and efficient banking in line with international standards, various measures were initiated based on recommendations of Narasimham Committee (1991 and 1998) and Verma Committee. Chipalkatti and Rishi (2006) noted that the banking reforms emerged from the recommendations proposed by the Narasimhan Committee Report (1991) advocated a move to a more market oriented banking system, which would operate in an environment of prudential regulation, transparent accounting, and stricter capital adequacy norms based on the Basel Capital accord. Nandy, D (2010) remarked that the measure of NPA helps to assess the efficiency in allocation of resources made by banks to productive sectors. The importance of a sound banking system and the role of NPA to create distress in banking system is discussed in many literatures. Jing-xin and Wei (2010) underlined that the large number of nonperforming assets in financial institutions is an important reason for causation and deterioration of financial crisis. Dash and Kabra (2010) supported the view that NPA has resulted in bank failures and financial crises in both developing and developed countries. Sharma et al (2001) noted that the magnitude of recovery amount overdue is one of the most important indicators of financial health. Ahmed (2010) stated that NPA restricts the banks lending capacity and stands in the way of dilution of funds to developmental activities and hence the socio economic development of the area. Ranjan R and Dhal S (2003) mentioned that among the various indicators of financial stability, banks nonperforming assets assume critical importance since it reflects on the basis of asset quality, credit risk and efficiency in the allocation of resources to productive sectors. Rose P and Hudgins S (2005) mentioned that since banks deal with less ownership funds ISSN: 2249-9962 April|2012 www.ijbmt.com Page | 2

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relative to the aggregative value of their assets, a relatively small percentage of bad loans push any bank to the brink of failure. Batra, S (2003) on implication of NPA mentioned that one of the major implication of NPAs is that it leads to the credit risk management assuming priority over other aspects of bank's functioning. The bank's whole machinery would thus be pre-occupied with recovery procedures rather than concentrating on expanding business. Perhaps, the most important consequence of NPA and reduction in asset quality is a reduction in bank lending (Heid and Kruger, 2011) Research on NPA including Karunakar et al (2008) noted that apart from flaws in credit assessment of borrowers due to political economy considerations, laxities in legal system, accounting disclosure practices, recession and willful default results in accumulation of NPA. Indian banking has improved significantly and regulatory authorities and banks initiated various measures to manage various causes of NPA. Caprio, G and Klingebiel, D (1996) observed that the problem of NPAs arise either due to the bad management by banks or due to the external factor like unanticipated shocks, business cycle and natural calamities. Still, many of the reasons mentioned in previous researches still remains and includes Reddy, PK (2002) who noted that the problem India faces is not lack of strict prudential norms but; The legal impediments and time consuming nature of asset disposal process Postponement of the problem in order to report higher earnings. Manipulation by the debtors using political influence. The reporting and NPA disclosure norms forced banks to strengthen their recovery management measures. Management of NPA accounts hence plays a vital role in banks stability and growth. It highlights the quality of loan assets, the liquidity and performance of bank. NPA indicate two major flaws in banking and economy. The additions to NPA component indicate the strength of credit risk management to a great extent. Higher additions to NPA thus indicate poor credit risk management of bank. The overhang component of NPA indicates the strength of recovery management measures of the bank, which in turn is closely related with the effectiveness of legal measures available for NPA recovery. Thus as pointed by Ahmed JU (2010), the prevalence of NPA can be attributed largely to inherent flaws in business models of the lenders, mainly financial institutions and to some extent commercial banks. To manage NPA, it requires sound credit risk management measures supported various legal measures. Much literature on trend and movement of NPA often briefed the significance of an efficient legal system to manage NPA. Gopalakrishnan T.V (2005) summarized based on a review of containment of NPA in international economies that NPA resolution in many countries focus on curative measures and not necessarily only preventive. The Indian banking sector in post-liberalization period witnessed considered progress on management of NPA and incorporated prudential measures for income recognition, asset-classification, provisioning, etc. As rightly pointed out by Chaudhary and Sharma (2011) major changes took place in the functioning of Banks in India only after liberalization, globalization and privatization. Banking which were completely preoccupied to satisfy the development priorities of government till 1991 showed signs of operational inefficiency. One of the notable signs of operational inefficiency was the poor quality of assets and alarming level on NPA. This necessitated the implementation of various prudential norms to improve the banking sector, which was felt not only in Indian banking sector, but banking sector across the world. The prevalence of NPA cannot be completely eliminated by adopting prudential norms and effective risk management practices. Ghosh, S (2005) pointed out that the quality of loan portfolio of financial institutions is widely perceived to be directly dependent upon the financial health and profitability of the institutions borrowers, particularly the non-financial enterprise sector. Sharma, M (2005) observed that more essential step to resolve NPA problem is timeliness of measures as it would save the system from a greater damage, obviating serious macroeconomic costs. Various measures and recovery mechanisms were initiated in Indian banking system in post-liberalization period. NPA cannot be eliminated in banking, but it can be controlled through various proactive and reactive measures. The proactive measures includes effective risk assessment, credit evaluation and monitoring techniques while reactive measures includes various recovery measures that include Asset Reconstruction Companies (ARCs), Debt Recovery Tribunals (DRTs), Lok Adalats, SARFAESI Act etc. Poongavanam, S (2010) noted that SAREAEST facilitated securitization of financial assets of bank and FIs or power to take possession of securities and sell them. The SARFAESI Act 2002 allows banks and other financial institutions to recover NPA accounts without the intervention of the Court. It provided three different methods for recovery of non-performing assets, namely: Securitization, Asset Reconstruction, Enforcement of Security without the intervention of the Court Thus it may be observed that SARFAESI helped to toughen the banking sector and allows them to securitize recovery of NPAs. Unny, M.P (2010) based on a review on recovery management practices emphasized that ISSN: 2249-9962 April|2012 www.ijbmt.com Page | 3

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SARFAESI Act brought a greater change in the debt recovery scenario in India. The major change brought in by SARFAESI is that it allowed the banks to take over possession from the defaulter, without going through the stringent court procedure, once the loan account has been categorized as a Non-Performing Asset.Pereira, C (2004) observed that the SARFAESI Act facilitated the establishment of ARCs. Gomez, C (2008) considered Lok Adalat as peoples court. Pathak, B.V. (2008) observed that Lok Adalats help in resolving disputes between the parties by conciliation, mediation, compromise or amicable settlement and thereby reduce burden on courts. They were conferred ad judicial status and every award of Lok Adalat shall be deemed to be a decree of a civil court and no appeal can be made to any court against the award made by Lok Adalat. Despite being a popular method, banks find difficulty in bringing the parties together when Lok Adalat meets. Debt Recovery Tribunals (DRT) is established by the Government of India under an Act of Parliament (Act 51 of 1993) for speedy settlement and recovery of debts due to banks and financial institutions. The tribunal is also the appellate authority for appeals filed against the proceedings initiated by secured creditors under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act. Padmanabhan Iyer, TKA (2005) observed that the ever-growing NPA, a fine euphemism coined to described the bad loans, promoted passing of the Recoveries of Debts due to the Banks and Financial Institutions Act, 1993 whereby a special Debt Recovery Tribunal was set up for the recovery of NPA. Ahmed, J.U (2008) based on a study on NPA recovery management explained that among the various channels of recovery available to banks for dealing with bad loans, the debt recovery tribunals and SARFAESI Act has been the most effective in terms of the amount recovered.

3. Research Methodology
In this study, efficiency of various recovery management measures is explained using a relative approach by comparing it with various NPA indicators. The general rule accepted worldwide is that a recovery measure is efficient if it enable recovery of more NPA in comparison to other measures. Also, a higher recovery as a percentage to Gross NPA, Net NPA, Additions to NPA and Reductions to NPA may also be considered as indication of efficiency of recovery management. This research investigates the trend in management of NPA with specific focus on three measures, i.e., SARFAESI Act, Debt Recovery Tribunals and Lok Adalats. The study infers based on statistical information on recovery of NPA accounts using the above three measures during the period 2003-04 to 2010-11. In addition to the analysis of trend in recovery of NPA accounts, the study also focus on the relationship between various recovery measures and sector wise NPA during the aforesaid period.

3.1 Research Questions

The study addresses the following research questions. 1. Whether stated recovery measures significantly improved the recovery management during the study period? 2. Do these recovery measures enabled recovery of Total NPA in significant terms? 3. Among the recovery measures selected, which measure yield more benefit for banks?

3.2 Variables Used

The variables used to undertake the study includes NPA Agriculture (XNPAA), NPA Micro and Small Enterprises (XNMSE), NPA Other Priority Sectors (XNOPS), NPA Public Sector (XNPSN), NPA Priority Sector (XNPS), NPA Non Priority Sector (XNNPS), Gross NPA (XGNPA), Net NPA (XNPA), Additions to NPA (XANPA), Reductions to NPA (XRNPA), Provisions towards NPA (XPNPA), Recovery of NPA using Lok Adalat (XRLA), Recovery of NPA using DRT (XRDRT), and Recovery of NPA using SARFAESI Act (XRSAR).

3.3 Methodology
To achieve the stated objectives, the research utilized descriptive statistics, average annual growth rate (AAG), correlation and regression analysis.

4. Data Analysis
4.1 Descriptive Statistics NPA Sector Wise (2003-04 to 2010-11)
NPA emanate from various sectors, classified into priority sector, non-priority sector and public sector. Priority sector includes agriculture, Micro and Small Enterprises and Other priority sector. Table No. 1 showed descriptive statistics highlighting the movement of NPA during 2004-04 to 2010-11. The statistic on sector wise NPA showed equal importance of both priority and non-priority sector in total NPA of ISSN: 2249-9962 April|2012 www.ijbmt.com Page | 4

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SCBs in India. 51% of total NPA arise from non-priority sector during the period. It may be observed from the standard deviation of descriptive statistic that non-priority sector showed a higher standard deviation indicating a widely disbursed NPA trend during selected period. A comparison between priority sector and non-priority sector NPA showed higher contribution of non-priority sector NPA (Average Rs.33,292 crores, Total Rs.266,339 crores), compared to priority sector NPA (Average Rs.30,517 crores, Total Rs.244,137 crores) during the period. It refutes the earlier statements made by bankers that priority sector is the major contributor for NPA. Also, it may be observed that the contribution of agriculture sector in total priority sector NPA (Average Rs.9,175 crores, Total Rs.73,400 crores) is less compared to Small Scale sector (Average Rs.9,559 crores, Total Rs.76,472 crores) and other priority sector NPA (Average Rs.11,783 crores, Total Rs.94,265 crores).

4.2 Recovery of NPA through DRT, Lok Adalat and SARFAESI Act
SARFAESI Act facilitated recovery of NPA accounts better than other modes of recovery, as may be observed from the descriptive statistics. Bankers in India often complained about the legal impediments for recovery of NPA accounts. This is addressed by enactment of SARFAESI Act. During the study period, an average of Rs.4370 crores were recovered using SARFAESI Act, while DRT and Lok Adalat enabled recovery of Rs.3,301 crores and Rs.141 crores respectively. During the study period, SARFAESI Act enabled highest recovery of NPA accounts, totaling Rs.34,960 crores, while recovery through DRT and Lok Adalat stands Rs.26,409 crores and Rs.1,126 crores respectively. Table No. 2 summarize the descriptive statistic on NPA recovery through SARFAESI Act, DRTs and Lok Adalats. The statistics showed that SARFAESI Act provided a more efficient tool for recovery management in Indian SCBs. Debt Recovery Tribunals stood second with a total recovery of Rs.26,409 crores during the period.

4.3 NPA (Sector wise) and Recovery (2003-04 to 2010-11)

It may be observed from Table No. 3 that recovery of NPA account increased during study period indicated in higher annual average growth (AAG) rate of amount recovered. While total NPA grew by an AAG rate of 7.43% during the study period, the recovery of NPA accounts increased by 13.26 (recovery through Lok Adalat), 13.26 (Recovery through DRT) and 49.37 (Recovery through SARFAESI Act. Among the contributors of NPA, agriculture sector reported higher AAG rate of 15.47, while small scale sector stand second reporting an AAG rate of 9.74.

4.4 Recovery as percentage of various NPA Indicators

The recovery of NPA is compared with NPA figures during the study period. The NPA figures include Gross NPA, Net NPA, Additions to NPA and Reductions to NPA. The below table calculates the average of recovery as a percentage of various NPA indicators during 2003-04 to 2010-11, using the following equation AvgR = Avg ([r1/NPA1100] + [r2/NPA2100] +..) Where; AvgR = Average Recovery during the study period. r1/NPA1100 = Recovery as a percentage of NPA figure for period 1. Table No. 4 showed the average of recovery as a percentage of NPA during the selected period. The average of recovery as percentage of NPA figure indicates the need to further the recovery process. Only 6.38% of Gross NPA is recovered through SARFAESI Act during the period, while the recovery of NPA using DRT is 3.95%. Thus the study indicate that only 10.56% of Gross NPA is recovered using the above mentioned measures during 2003-04 to 2010-11. The recovery as percentage of net NPA is 15.34% using SARFAESI Act and 9.67% using DRT. It means that around 25% of Net NPA is recovered through implementing the above mentioned recovery measures. The recovery of NPA as percentage of total additions to NPA is 11.27% using SARFAESI Act and 7.35% using DRT. The total recovery as a percentage of provisions towards NPA is 33.79% using SARFAESI Act, while it is 22.51% using DRT. Even though remarkable progress in recovery particularly using SARFAESI Act and DRT may be observed, the recovery as a percentage of total NPA (Gross NPA, Net NPA, Additions to NPA and Reductions to NPA) should be enhanced through reducing the delays in existing recovery methods. Based on the analysis, it is suggested to enhance the existing recovery methods by removing the bottlenecks in its implementation and to further constitute more recovery measures.

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4.5 Correlation Study

A correlation study is undertaken to evaluate the relationship between the various NPA contributors and recovery measures. The analysis in Table No. 5 revealed presence of strong positive correlation between various NPA contributors and SARFAESI Act. Thus it shows that the total recovery increased using SARFAESI Act increased with an increase in NPA. SARFAESI Act reduced many bottlenecks that existed in NPA recovery in post-liberalization period. Table No. 5 indicate that there exists positive and significant correlation between movements of total NPA in agriculture sector and total recovery through SARFAESI Act (r =0.920, Sig = 0.001). The total priority sector NPA and recovery through SARFAESI Act also showed positive and significant correlation (r = 0.900, Sig = 0.002). The correlation between NPA indicators and recovery using DRT and Lok Adalat is showed any significant relationship.

4.6 Regression Study

A regression equation is formulated to study the relationship between different sectors of NPA and recovery using SARFAESI Act. The other two recovery modes are not taken into consideration since it does not reveal any significant correlation with different sectors of NPA. The regression equation formulated for the study is; (XRSAR)= -4314.425 +.469(XNPS) - 3.705 (XNPSN) 0.116(XNNPS) Table No. 6 show the correlation explained through R, R square, and adjusted R square. The R Square value indicate that 91% of the variability in the dependent variable i.e., recovery using SARFAESI act can be attributed to the changes in the independent variables. It shows the fact that the recovery of NPA using SARFAESI Act moves in line with the movement of NPA. Table No. 7 calculate the significance of regression equation. The F-test (F 13.611, Sig = 0.14, i.e., Sig < 0.05) indicate that the regression model provides reliable explanation for the behavior of dependent variables i.e., recovery using SARFAESI Act. Table No. 8 indicate the significance of priority sector, public sector and non-priority sector on total recovery using SARFAESI Act. The importance of public sector and non priority sector is not statistically significant observed from the significance level 0.524 and 0.384 respectively. It may be observed from the above that only priority sector NPA and recovery using SARFAESI Act greatly depend each other. The movement of other variables are not significant as may be observed from the significance value greater than 0.05. Since it may be observed that priority sector NPA is significant predictor to recovery of NPA through SARFAESI Act, a revised regression equation is calculated. (XRSAR) = -6603.995 + 0.360 (XNPS) The regression model confirms that the priority sector NPA and recovery using SARFAESI Act greatly depend each other.

5. Major Findings
The descriptive statistics showed that non-priority sector contribute more NPA in total NPA of Indian SCBs in the study period. This refutes earlier observation made by bankers regarding the significance of priority sector on total NPA of banks. The post-liberalization period saw major reforms in banking sector that include relaxing norms for priority sector lending. This might have resulted in more non-priority sector NPA in Indian SCBs. Another major finding is the correlation between total priority sector NPA and recovery using SARFAESI Act. It may be observed from the correlation study and regression study that priority sector NPA is an important predictor to the movement of total recovery using SARFAESI Act. Among the various recovery modes, recovery using SARFAESI Act contributed significant change in management of NPAs in Indian banking sector. It is right to point out that SARFAESI Act contributed landmark change in NPA recovery management. It may also be inferred that one of the significant reason for the slow pace of growth of NPA since 2003-04 is the effectiveness of recovery measures, except for the fact that there has been an increased growth of NPA since 2007 due to global financial crisis and due to the recessionary pressures. Among the various recovery measures SARFAESI Act provided much needed momentum and eased the legal hurdles to recover NPA accounts. It does not lead to inference that recovery of NPA in absolute amount increased at a faster rate than incidence of NPA. A comparison of the average of ratio of recovery as a percentage of various NPA indicators highlighted the need ISSN: 2249-9962 April|2012 www.ijbmt.com Page | 6

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to further enhance the recovery process. This suggestion is based on the observation that the recovery as a percentage of Gross NPA, Net NPA etc is still average around 10% to 20%. Among priority sector NPA, recovery using SARFAESI Act showed positive and significant correlation with NPA- Agriculture (r =0.920, Sig = .001) and other priority sector NPA - excluding agriculture and Small Scale Sector (r = 0.744, Sig = 0.034). The correlation between total priority sector NPA and recovery using SARFAESI Act is also positive and significant (r = 0.900, Sig = 0.002)

6. Conclusion
The attempt made in this research to evaluate management of NPA in Indian SCBs focused mainly on the recovery management measures since 2003-04. In specific terms, the study evaluated the trend in movement of total NPA sector wise and recovery of NPA accounts through Lok Adalats, DRTs and SARFAESI Act. It may be observed from the growth rate of major recovery measures that it increased at a faster rate than NPA during the study period. Among the recovery measures, SARFAESI act provided much needed momentum to improve the recovery measures. This trend is good for Indian banking sector that require strong and stringent measures to tackle the presence of NPA to maintain new standards, to grow and improve, to remain vibrant and viable in Indian economy.
Siraj. K.K, Research Scholar, School of Management Studies, CUSAT, Cochin Prof. (Dr). P. Sudarsanan Pillai, Research Guide, School of Management Studies, CUSAT, Cochin

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Appendix Tables Used in Report Table No. 1: Descriptive Statistic NPA Sector wise (2003-04 to 2010-11) Amount in Rs. Crores Non-Priority Sector Total 21,511 47,841 46,873 94,513 266,339 514,291 33,292 31,956 9,396 3,322 -1.424 0.310 25,362 64,286 58,498 16,385 5,793 0.157 1.041 46,672

Minimum Maximum Sum Statistics Mean Median Std Deviation Standard Error Kurtosis Skewness Range

Agriculture 6,718 16,660 73,400 9,175 7,709 3,283 1,161 4.588 2.077 9,942

Micro & Small Enterprise 6,488 15,990 76,472 9,559 8,337 3,354 1,186 0.626 1.199 9,502

Others 8,523 14,559 94,265 11,783 12,417 2,251 796 -1.524 -0.420 6,037

Priority Sector 24,658 47,209 244,137 30,517 27,465 7,764 2,745 2.814 1.788 22,551

Public Sector 299 685 3,818 477 493 121 43 0.244 0.139 386

Table No. 2: Descriptive Statistics Recovery of NPA Accounts Amount in Crores SARFAESI Act 1,156 11,561 34,960 3,866 3,103 4,370 1,097 5.443 2.102 10,405

Minimum Maximum Sum Statistics Median Standard Deviation Mean Standard Error Kurtosis Skewness Range

Lok Adalat 96 223 1,126 131 43 141 15 0.485 1.013 127

DRT 2,117 4,710 26,409 3,241 783 3,301 277 0.759 0.449 2,593

Table No. 3: NPA Sector-wise and Recovery (2003-04 to 2010-11) NPA Indicators Growth Rate XNPAA XNMSE XNOPS XNPS XNPSN XNNPS XTNPA XRLA XRDRT XRSAR AAG 15.47 9.74 8.08 9.46 1.01 7.01 7.43 13.26 13.26 49.37

Table No. 4: Average (Recovery as a percentage of NPA) during 2003-04 to 2010-11 Mode of Recovery SARFEASI Act Lok Adalat Debt Recovery Tribunal XGNPA 6.38 0.23 3.95 XNPA 15.34 0.57 9.67 XANPA 11.27 0.46 7.35 XRNPA 12.58 0.45 7.81 XPNPA 33.79 1.42 22.51

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Table No. 5: Significance of Correlation between the NPA (Sector wise) and Recovery of NPA Lok Adalat NPA Agriculture Pearson Correlation Sig. (2-tailed) NPA SSI Pearson Correlation Sig. (2-tailed) Others NPA Pearson Correlation Sig. (2-tailed) Priority Sector NPA Pearson Correlation Sig. (2-tailed) Public Sector NPA Pearson Correlation Sig. (2-tailed) Non Priority Sector NPA Pearson Correlation Sig. (2-tailed) Total NPA of all SCBs Pearson Correlation Sig. (2-tailed) .043 .920 -.082 .848 -.222 .597 -.082 .848 -.588 .125 -.329 .426 -.232 .581 DRT .175 .679 .054 .899 .372 .364 .205 .626 -.638 .089 -.084 .843 .044 .917 SARFAESI Act .920(**) .001 .683 .062 .744(*) .034 .900(**) .002 -.365 .374 .563 .146 .747(*) .033

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Table No. 6: Explained Relationship between the Dependent (XRSAR) and Independent Variables (XNPS), (XNPSN) and (XNNPS) R R Square Adjusted R Square Standard Error of the Estimate 0.954 0.911 0.844 1226.158

Table No. 7: Significance of Regression Equation Sum of Squares 61389543.704 6013850.296 67403394.000 Df 3 4 7 Mean Square 20463181.235 1503462.574 F 13.611 Sig. .014

Regression Residual Total

Table No. 8: Significance of Impact of NPA Sector wise on Recovery using SARFAESI Act T 3.440 -.698 -.978 Sig. .026 .524 .384

Priority Sector NPA Public Sector NPA Non Priority Sector NPA

Table No. 9: Significance of Impact of Priority Sector NPA on Recovery using SARFAESI Act t 5.051 Sig. .002

Priority Sector NPA

Figure No. 1: Recovery through SARFAESI Act as % of NPA indicators

Recovery through SARFAESI Act as % of NPA indicators

30 25

Percentage

20 15 10 5 0 2004 2005 2006 2007

Year

2008

2009

2010

2011

Gross NPA

Net NPA

Additions to NPA

Reductions to NPA

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Figure No. 2: Recovery through DRT as % of NPA indicators

Vol. 2 No. 4

Recovery through DRT as % of NPA indicators

30 25

Percentage

20 15 10 5 0 2004 2005 2006 2007

Year

2008

2009

2010

2011

Gross NPA

Net NPA

Additions to NPA

Reductions to NPA

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