With finance minister Pranab Mukherjee expressing concern over the asset quality of public sector banks (PSBS) at the end of the financial year, leading PSBs have swung into action, trying to install elaborate risk management systems to check further deterioration and focus on maximum recoveries in the first quarter of 2011-12.

Banking analysts said private banks improved their overall performance in 2010-11 with lower slippages while PSBs showed an increase. PSBs? gross NPAs increased 4% quarter on quarter while net non-performing loans rose 5%, resulting in higher provisions for the quarter ending in March.

KR Kamath, CMD, Punjab National Bank, the country?s second-largest PSB said: ?We have set up robust mechanisms including a credit committee and a risk management division. Whenever we receive any signal of an account becoming irregular, these bodies get into action.? Further, all loans over Rs 50 lakh are directly monitored by general managers. PNB?s risk rating system has also been strengthened, where pre-sanctioning too is assessed in terms of credit scores.

?We have strengthened our recovery mechanisms and hold regular interactions with our borrowers and try to sort out issues for the settlement of loans. With these measures, we expect our asset quality will improve further by the fiscal-end.?? he said.?

MD Mallya, CMD, Bank of Baroda observed that the bank has established a credit monitoring cell at the corporate office level to monitor sticky assets on a constant basis. ?Apart from continuously monitoring bad assets at the branch level, we also follow them at the corporate office level,?? he explained. BoB?s net NPA was at 0.36% as on 31 March, 2011 and the bank is intending to maintain it at this level by the end of the fiscal too. ?Most of the NPas formed due to stimulus packages, which followed in their restructuring too. But, that is over and we have already provided against them,? Mallya said.

?Now, we are sure of asset quality improvement during the current fiscal,?? commented Mallya.

Archana Bhargava, executive director, Canara Bank said the bank has dispatched all 14 general managers at the corporate office to visit the circles and make one-to-one contact with borrowers.

?We felt that the field staff couldn’t take decision. We have asked all GMs to hold Lok Adalats and recovery campaigns to recover loans. It has helped us make R 2,000 crore recovery as on 31 Mach, 2011. The bank is opting for a sector- wise rating system which guides it to what extent it can go for extending loans in a particular sector. Net NPA, which was at 1.09% as of now, is projected to come down below 1% mark by the end of the fiscal.

Mangalore-based Corporation bank has put up the photographs of all its willful defaulters at the bank?s branches. Said Ramnath Pradeep, CMD: ?It has helped my bank a lot in the recoveries. We have made a substantial recovery of R206 crore so far. Whatever we have done was on the basis of the judgment which was made by Madras High Court in 2006.?? The HC order had commented that if borrowers have many innovative ideas to avoid repayments, why shouldn?t banks also have similar ideas to recover their money.

Union Bank has a three-stage process of monitoring its NPAs. ?We are always ready to help those who are unable to pay due to genuine reasons. But we can?t allow any willful defaulter to remain free. We are in the process of setting up collection centres at the regional level, which will follow up the stressed accounts and act as a recovery centres. First, we will set up a pilot centre and on depending its success, we will go for it at the pan-India level,?? said SS Mundhra, ED, Union Bank of India. Union Bank’s net NPA was at 1.19% during 2010-11 and has plans to bring it to less than 1% by the end of 2011-12.

However, analysts have cautioned that despite all the new initiatives, PSBs might still witness more slippages in the first half of 2011-12.