Analysis of Debt Recovery Management

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has failed to make interest or principal payments for 90 days. Consequently, the asset will be considered as NPA for the whole year. Hence for a bank to be in tune with its status of “fast growing bank”, its recovery policies should be clear and effective. The researcher has done research on the evaluation of debt recovery management of Vijaya Bank, Regional Office (Mysore) to find out the problems faced by the branch in recovering its NPAs.

1.5 Objectives

The primary objective of this research project is to evaluate the debt recovery management in Vijaya bank. The secondary objectives include the following:

• To know the type of loans extended by the bank

• To identify the non-performing loans

• To study the recovery mechanism used by the bank for recovering dues

• To find out the effective recovery mechanism

• To provide suggestions in reducing non-performing assets, if required.

1.6 Methodology of the study

Research design is a logical and systematic plan prepared for directing a research study. It is a detailed outline of how an investigation will take place. A research design will typically include how data is to be collected, what instruments will be employed, how the instruments will be used and the intended means for analyzing data collected.

The researcher has used a descriptive and analytical research design has been used to identify the quality, quantity of loan assets and the techniques to minimize NPAs.

1.6.1 Sources of Data

The researcher has collected data from both primary and secondary sources to study the debt recovery management aspect of the bank.

Observation and personal discussion with the bank manager and other personnel in the bank has formed the main sources of primary data.

The secondary sources include the following:

• Accounting records like registers, annual records, auditor’s report, past 5 years’ balance sheet of the bank

• Various journals related to banking, books, reports published in websites and personal opinion.

1.6.2 Data Collection Tools

The researcher has used excerpts from various documents and journals of the bank as data collection tools. Direct interview of customers of the bank also form part of data collection tool.

1.6.3 Data Analysis and Interpretation

The researcher has used statistical tool like straight line fitting to facilitate in analyzing the data. The data analyzed with the help of statistical tool has been interpreted through tables and suitable graphs.

1.6.4 Sample Size

The researcher interviewed 30 borrowers of Vijaya Bank, Mysore Regional Office regarding the effective recovery mechanism.

1.6.5 Sample Design

The researcher picked up the sample size of the study on the basis of their NPA balance. The top 30 highest NPA accounts have been taken into consideration for this research.

1.7 Limitations of the study

The limitations of this research are:

• As time constraint is one of the main limitations of this study, data could be collected only from one branch.

• Since the study is restricted to Vijaya Bank, Mysore (Regional Office), the data analysed in this research project may not hold good for other branches of the same bank and even other banks.

1.8 Concepts used and list of abbreviation

Concepts used:

The researcher has explained the following concepts which will help in understanding this research project better:

• Debt: The word Debt comes from the Latin Debere which means ‘to owe’. A debt is an obligation owed by one party (the debtor) to a second party, the creditor. A debt is created when a creditor agrees to lend a sum of assets to a debtor. Debt is usually granted with expected repayment. This includes repayment of the original sum, plus interest.

• Loan: Loan is an arrangement in which a lender gives money or property to a borrower and the borrower agrees to return the property or repay the money, usually along with interest, at some future point(s) in time.

• Priority Sector: Some areas or fields in a country depending on its economic condition or government interest are prioritized and are called priority sectors i.e. industry, agriculture. Banks are directed by the Central bank of the country that loans must be given on reduced interest rates with discounts to promote these fields.

• Non- Priority Sector: Sectors which do not come under the head priority sector, comes under non-priority sector.

• Default: A default is the failure to pay back a loan. In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract.

• Non-Performing Assets: NPA is a debt obligation where the borrower has not paid any previously agreed upon interest and principal repayments to the designated lender for an extended period of time.

• Debt Recovery Agent: Debt recovery agent is a person or entity engaged by a bank for the purpose of collecting specified loans, or advances or other kind of dents from the debtors ( or borrowers) in accordance with the specified terms and conditions.

• Debt Recovery: A bad loan that is recovered, which otherwise would have been written off is known as debt recovery.

List of Abbreviations

The following are some of the abbreviations used in this research project:

• ARMB Asset Recovery and Management Branch

• ATM Automated Teller Machine

• BIFR Board of Industrial and Financial Reconstruction

• CDR Scheme Corporate Debt Restructuring Scheme

• DCA Debtor-Creditor Agreement

• DRA Debt Recovery Agency

• DRT Debt Recovery Tribunal

• EMI Equated