Bankers are increasing management oversight to step up their efforts to increase recoveries and stem slippages. Finance minister P Chidambaram said his ministry has asked public sector banks to focus on recovery and added the banks had recovered Rs 18,933 crore in the nine-month period that ended in December.
Bankers have said that they are looking at increasing recoveries through a combination of one-time settlements, asset reconstruction companies (ARCs) and invoking the SARFAESI Act.
?Majority of the bad loans are being settled by invoking the SARFAESI Act, then followed by the sale to ARCs. But for loans below Rs 10 lakh people are interested in just settling their dues,? said SL Bansal, chairman and MD of Oriental bank of Commerce.
Sudhir Kumar Jain, chairman and MD of Syndicate Bank, said increased intervention by the bank has yielded more results for them. ?We are holding Lok Adalats in tackling smaller accounts. We have four adalats across branches over the year. The spot recoveries in these four adalats have been about Rs 171 crore. And total one-time settlement (OTS) we have made in this adalat is to the tune of Rs 540 crore. These strategies are paying off now.?
Jain added that for larger accounts the bank holds video conferences with general managers every fortnight and discuss strategies on how to recover loans from those accounts that also helps arrest slippages. Syndicate Bank?s bad loan slippages in Q2 this year and the situation improved at the end of Q3 where the slippages stood at Rs 670 crore.
Banks such as Bank of India and Central Bank of India have set up high-level committees to oversee and follow up on wilful defaulters on a weekly basis as part of their recovery efforts. VR Iyer, CMD of Bank of India, has been using a call centre and correspondents to follow up on borrowers which helped recovery efforts.
?In fact our call centre makes about 700 calls per day to our borrowers across the country. This has doubled our recovery. Going forward I think this will be a very important tool,? she explained. Recoveries at BoI increased 174.25% y-o-y and 134.98% sequentially to Rs 1,001 crore in Q3FY14.
The finance ministry also ordered crisis-hit United Bank of India?s management to recover loans worth at least Rs 1 crore every day and Chidambaram added during his review of public sector banks earlier this month that United Bank has made cash recoveries worth Rs 400 crore and account upgrades worth Rs 800 crore.
United Bank posted a net loss of Rs. 1,238.08 crore with the amount of gross non-performing assets (NPAs) touching a whopping Rs. 8,545.50 crore.
Analysts still expressed concerns about asset quality in the banking system.
Vibha Batra, senior vice president at ICRA Ratings, said recoveries and upgradations as a percentage of outstanding gross NPAs has come down to 25.8% in Q3 FY14 from 37.2% in Q3 FY13 in public sector banks, suggesting that the pace of NPA generation is more than the recovery rate at banks.
The gross NPAs at end of Q3 for the banking stood at Rs 2,28,200 crore up from Rs 1,63,300 crore from the same period last year.
