In finance the term recovery refers to collection of amount due. The normally recovery depends on the purpose, time and condition, business running process etc.
- Installment fixes on salaried person on a monthly basis.
- In the agriculture sector, installment fixes on biannual basis.
- Business person normally 1 year per installment.
Recovery is different from one loan to another.
- In short term loans recovery is less than 36months.
- In medium term loans recovery is from 36 months to 84 months.
- In long term loans recovery is normally 84 months or longer.
The repayment period can extend up as per the STC act in exceptional cases, normally bank recover the loan amount from customer, easily do not give the trouble to them.
Interest earned is the income for the corporation, this should payments, the entire expenses and plough back requirement therefore, recovery of money is one of the major source of funds for the corporation. The health of the corporation is judged by the extent of recovery that it can affect. All source of funds carry cost, if the cost of borrowings is higher, it reduces the margin profit, further the profit are subject to payment of income tax as per applicable laws. The corporation also is bound by minimum dividend obligation irrespective, whether it makes profit or not out of the post tax and post dividend income. The memos are retained in the corporation by way of reserves. Plough back of funds into system is emerging as one of the very important sources of funds in the total resource mix, if the corporation has to retain sufficient money for the business operations; it has to generate more income. More income obviously improving the recovery. Therefore, systematic follow-up recovery of loan plays a significant role in our operations. In fact, is not exaggeration of the state that effective recovery of loans is the backbone of any financial institutions.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.