According to the ICICI's annual report for the year 1998-99, Rs 538 crore, or 14.4 per cent, of NPAs is in the chemical sector, Rs 473 crore (12.7 per cent) in man-made fibres and Rs 388 crore (10.4 per cent) in the iron and steel sector. The net outstanding NPAs of ICICI increased to Rs 3,623 crore as on Mach 31, 1999 from Rs 2,811 crore in the previous year. ``The net NPA ratio has increased from a level of 7.6 per cent to 7.8 per cent as on March 31, 1999. ICICI is following an aggressive approach towards tackling the NPA problem including focussed recovery efforts and a higher level of provisioning,'' it said.

ICICI made substantial provisions and write-offs (including write-down of equity investments) of Rs 472 crore during the financial year 1998-99, representing an increase of 63 per cent as compared to Rs 289 crore for thefinancial year 1997-98. ``ICICI believes that any deterioration in individual credit facilities should be recognised to the greatest extent possible through the establishment of specific allowances. As a matter of prudence, an additional general provision of Rs 110 crore has been made. The provision being over and above that required by RBI guidelines, this amount has been appropriated from the special reserve,'' ICICI has said.

It said the net outstanding amount of the 20 largest NPA cases where ICICI has decided to recall loans and enforce its security interest against the borrowers (recovery cases) was Rs 486 crore with no individual borrower accounting for more than Rs 76 crore. As at the same date, the net outstanding amount of the 20 largest NPAs other than recovery cases aggregated Rs 1,256 crore, with no individual borrower accounting for more than Rs 199 crore.

During the period under review, ICICI set in place a process involving a detailed and periodic analysis of its performing assetsprotfolio, to determine on an on-going basis, the health of every borrower account in the loan portfolio. ICICI used the interest cover approach to determine stress levels in the performing assets portfolio as its believes that this approach is the most effective in gauging the real quality of the asset portfolio.

``Conceptually this approach involves assessing the underlying cash flows of the borrower and then determining adequacy of interest cover after allowing for all expenses required to maintain the corporate as a going concern. For projections, typically a worst case scenario is used for product and input prices and capacity utilisation levels. This analysis provided a much deeper understanding of potential stress in the asset portfolio thereby enabling ICICI to initiate more stringent monitoring and control mechanisms and to develop a proactive strategy for early stage solutions,'' it said.

ICICI has placed great emphasis on recovery and settlements in respect of bad assets and this focus has beeninstitutionalised across the organisation. This has resulted in a significant mindset shift towards tackling NPAs. Asset quality targets are today a key parameter for employee performance evaluation.

``The effort in this direction has been based on a proactive approach towards identification of stress cases and early stage solutions to incipient problems. An aggressive approach has been adopted towards defaulters with a focus on early stage recall and the use of collateral to enforce settlements. A clear exit strategy is being followed in the case of intrinsically unviable and historical NPAs with emphasis on the time value of recovery and a pragmatic approach towards settlements,'' the ICICI annual report said.

ICICI's experience shows that it has been recovering almost 100 per cent of principal on a cash basis and about 70 per cent on a present value basis whenever it has negotiated a settlement. This experience has been sustained over the last two financial years.