Under pressure to recover money owed to it, State Bank of India (SBI) has hired small-time detective agencies to help track down property owned by errant borrowers. The country’s largest lender will also soon start selling these properties by advertising them on a website, PK Malhotra, deputy managing director, told FE.
Frustrated with defaulters’ attempts to delay proceedings in the courts, SBI has decided that using detective agencies familiar with their whereabouts to unearth real estate owned by them might turn out to be more productive.
In the normal course, SBI files cases with the debt recovery tribunals (DRT) to recover its dues. However, borrowers are able to get away with adjournments on the flimsiest of grounds, delaying the process. The amount locked up in disputes in the DRT is estimated at over R1 lakh crore.
“We have to present evidence of properties not attached by us to the DRT and ask for approval to take possession of them. Which is why we have engaged local detective agencies in Mumbai, New Delhi, Chennai, Bengaluru and Kolkata to locate properties that the borrower has not declared to the bank,” Malhotra explained.
Banks, using the ‘attachment before judgement’ clause of the civil procedure code (CPC), can attach properties other than the ones already attached. “Once we get the decree from the DRT, we try to sell that property through an e-auction,” the DMD said. SBI has showcased properties in its possession at a couple of malls in Ludhiana and Kanpur. Prospective buyers are educated on the bidding process at an e-auction. Next month, the bank will launch a website on which all properties will be displayed, as also cars. In the meantime, the lender is selling such apartments on other sites.
SBI’s total recoveries from bad loans in FY14 stood at R7,738 crore.
In addition, the lender recovered R1,543 crore from accounts that had been written off. “Even if we write off an account, and chances of the money coming back are slim, the proceedings against the promoters and the company continue,” the DMD pointed out.
Banks in India have been burdened by rising non-performing assets (NPAs) in the last couple of years but have been unable to recover their dues thanks to a slow legal system that borrowers take advantage of. While SBI’s recoveries in the June 2014 quarter more than doubled year-on-year, they saw a 6% sequential dip. According to Reserve Bank of India data, the gross NPA ratio of public sector banks at the end of March 2014 was 4.7%, up 90 basis points from the previous financial year, while the the net NPA ratio was higher by 70 basis points in FY14 at 2.7%.