Preventive and curative measures to be taken by Banks for containment of NPA 

1. Proper Credit appraisal.

The process of prevention and containment of NPA should be initiated or taken care at the very initial stage effective from credit appraisal. Proper credit appraisal place very important and crucial role in the credit portfolio which involves the following important steps. 

1. Gathering of KYC, financial results, CMA data and other relevant information required for credit appraisal.
2. Pre-sanction visit to the unit of the borrower is unavoidable step in the process of sanction of credit facilities to a prospective borrower. 
3. Experience in the field and past history of the borrower should form part of proper credit appraisal. 
4. Security obtained to cover the credit facilities can not be ignored and should be validly charged to the bank to enable bank to realise in case of account turning into NPA category.

2. Identifying the weaknesses of Assets through early warning signals.

1. The possibility of account turning into a NPA category is from the day one of its sanction. 
2. It is important how the bank and branch deals with operation of the account and keeps close watch on the operations of the account.
3. As per RBI guidelines the banks have developed categorisation of weak accounts as SMA (I), SMA (II) and substandard. This should be monitored very carefully by the banks to avoid account going into NPA category and probable loss to the customer and bank.
4. Any account all of a sudden does not turn into NPA but shows early warning signals to deteriorate in asset classification. These are like erosion in the security, diversion of funds etc which should be monitored effectively by the banks on day-to-day basis. 

3. Upgradation of assets through various methods.

1. It is always said that banker should act as guide, philosopher and mentor to the borrower in case of genuine business difficulties of the borrower and where there is no scope for mal practices in the business. 
2. In such cases the account should be favourably considered for upgradation of asset classification. 
3. In genuine cases the bank may consider allowing the operations in the account and supporting borrower by even sanction of small portion of working capital/ FITL to get rid of the borrower of crises. 
4. Sometimes it is possible that the borrower may be allowed additional credit facilities by obtaining additional collateral securities if available with the borrower so that the accounts get revival, upgradation in the classification and borrower gets boost and movement to come to the expectations of the bank for turning the asset as a standard asset.

4. Recovery of NPA’s through compromised settlements, announcement of one-time settlement schemes (OTS).

1. It happens many times despite all the measures as contained above the revival and upgradation of account becomes impossible due to reasons like recession in the market, product going out of demand in the market, natural calamities etc.
2. In such cases still, RBI is announcing, from time-to-time various compromised settlements and one-time settlements schemes. 
3. These two above are very useful and important steps in recovery of amounts in NPA accounts which should be monitored effectively. 
4. In compromised settlements and OTS schemes the NPA’s are recovered to major extent and beneficial to both borrower and banks.  

All though turning the account into NPA category is inevitable, if the bank and borrower adopts the steps mentioned above the prospective loss to the bank and customers can be contained, reduced or even eliminated to large extent.