The Indian economy has also been affected by bad and doubtful assets of its banks and financial institutions. Although no exact data is available on the amount of NPAs in Indian context as estimates vary between Rs. 70,000 crore and Rs. 1,00,000 crore of our banks and financial institutions. The multiplicity of factors is responsible for the present status of NPAs in these financial institutions in India. The factors can be classified as originating, internal, external and other factors. Originating factors are inefficient management, unavailability of inputs and misappropriation of funds. Internal factors consist of financial problems, project appraisal deficiencies and project management deficiencies. Political interferences, lop-sided laws and government policies are under the category of external factors. Other factors are lack of good credit risk management system, inadequate preventive measures and inadequate post-disbursement supervision.
The Reserve Bank of India and the Government of India took number of measures from time to time like One Time Settlement Scheme (OTS), Debt Recovery Tribunals (DRTs), Lok Adalats, etc. to stem the rot, but fell short of the desired results and high expectations of the concerned people in particular and society in general. The government of India was critised and faced scathic attack from different quarters of the economy and the society. Obsessed with the criticism, the Government of India promulgated Securitisation Ordinance in June 2002 and enacted the full fledged Act in December 2002 entitled Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002. This is also known as SARFAESI Act 2002 or simply the Securitisation Act.
