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Banks should develop and implement an NPL strategy that is approved by the Board of Directors or its delegated authority.
ii.
The NPL strategy should layout in a clear, concise manner the bank’s approach and objectives, and establish annual quantitative targets over a realistic but sufficiently ambitious timeframe, divided into short, medium and long-term horizons. It should serve as a roadmap for guiding the allocation of internal resources (human capital, information systems, and funding) and the design of proper controls (policies and procedures) to monitor interim performance and take corrective actions to ensure that the overall goals are met.
iii.
The NPL strategy should consider all available options to deal with problem loans, where banks review the feasibility of such options and their respective financial impact. These include hold/restructuring strategies, active portfolio reductions through either sales and/or writing off provisioned NPLs that are deemed unrecoverable, taking collateral onto the balance sheet, legal options and out-of-court options.
iv.
Banks should follow the principle of proportionality and materiality, while designing the NPL strategy, where adequate resources should be exhausted on specific segments of NPLs during the resolution process, including MSME’s.
