Loan Recovery Case Study

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1. INTRODUCTION
Recovery of loan is difficult function to ascertain profitability of the corporation specifically in a loan portfolio. Which is bad with high NPAs . Traditional approach of loan recovery process has not able to determine the results and corporation are thinking to change the strategy for recovery of loan from customer. To have success in recovery procedure the management should have proper guidelines about the recovery procedure and effective follow up and should be done at a proper time period at a appropriate action.

2. TOPIC CHOSEN FOR STUDY A STUDY ON “ LOAN RECOVERY PROCEDURE AT KSFC ”.

3. NEED FOR THE STUDY
The recent economic crisis has been seeing more number of defaults on loan in financial institutions
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This led to the view that “ failures of subsidized rural credit are frequently laid at the feet of the institution that were created to manage it”.
BRAVERMAN AND GAUSH, : poor recovery was linked to institutional factors such as the low interest rates charged on targeted loans , the high transaction s cost and credit rationing caused by interest rate ceilings, the absence of savings mobilization in many FIs the reliance on outside funds ( national treasuries or foreign donors ) for loans, the practice of basing loan size on production cost formulas rather than on borrower debt capacity , and rewarding loan officers for the volume of loans made rather than by individual defaulters repentance
CHRISTEN; CUEVAS AND GRAHAM ;MONTIEL;TAKRONI; VAN STEENWYCK
One author reported that financial institutions lending their own deposits have better recovery rates than institutions dependent on outside sources of funds . Another study concluded that issues concerning willful default are better addressed through actions to increase the lenders willingness to collect rather than through the borrower’s willingness to repay
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The branches tended to understaffed compared to the volume of loans distribution . branches personnel have been poorly trained in the supervision of loans. The majority of their training emphasized the proper documentation procedure for disbursing loan rather than emphasizing appropriate recovery procedure.
USAID : recovery efforts were hindered by the UACCs in two ways : the committees ignored the branch personal’s acquired skills in the borrower selection process for short term loans; and UACCs assumed no responsibility for the recovery of loans they approved . loan recovery was the responsibility of the branch disbursing the loan
GREGORY AND ADAMS : The recovery rate measure amounts recovered during the year as a percentage of the amounts coming due during the year plus overdue including principal and interest due ie, the collection ratio. During this period the banking system as a whole recovered less than half the amount of loans coming due and overdue. The bank wide recovery position peaked in 1980/1981 with a reported recovery rate of 49 percent . it is reported that the better recovery position can be explained , in part by a practice of refinancing overdue loans

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