Kolkata-headquartered UCO Bank found itself in the middle of a social media storm this week after a circular by the bank’s recovery official on Wednesday to all zonal heads said the lender had decided to meet and greet and offer sweets to each branch’s top 10 non-performing account (NPA) borrowers during Diwali.
The rationale listed for the move in circular was simple: That connect between bankers and borrowers worsens once an account turns into NPA and it is better to meet such borrowers in person. The notice said that not every NPA generator is a wilful defaulter and that genuine reasons like business failure or loss, death of key business persons or other unavoidable circumstances may have contributed to lack of repayment by the borrower.
“We cannot deny the fact that a customer presently classified as NPA borrower was once a valued customer of the bank,” the notice said. It added that often times it has also been noticed that “clash of ego” between banker and customer also leads to account turning into NPA.
Accordingly, the bank decided to send sweets to top 10 NPAs in each branch and do a formal meet and greet to better relations between the two parties, potentially leading to repayment of loans and NPA turning into a standard account.
However, the bank on Friday withdrew the circular after the move was criticised on social media. Speaking to FE, UCO Bank MD & CEO Ashwani Kumar said his team decided to only meet and greet with top NPA generators, but as the person drafting the circular may not have ever sent a meet and greet invite without mentioning extension of sweets, they added the Diwali gift part into the circular.
“The real intent was to break ice with the NPA borrowers as sometimes it is difficult to talk to them. One way was to reach out to them and greet them with festival greetings, so that was the intent and they (employee) wrote distribution of sweet boxes, which was not the intent, it was to meet and greet,” he said.
To be sure, UCO Bank isn’t the first lender to have opted for an unique approach for repayment of NPAs. In September, country’s largest lender State Bank of India also said it will be greeting those likely to default on monthly installments with a pack of chocolates. This process will be done in collaboration with a fintech, SBI’s MD Ashwini Tewari had said.
“With two fintechs which use artificial intelligence, we are piloting a novel way of reminding our retail borrowers of their repayment obligations,” he said.
While one fintech is doing conciliation with borrowers, the other is alerting the bank on the propensity of a borrower to default. And to such borrowers who are likely to default, the representatives from the fintech will visit them, carrying a pack of chocolates for each of them, and remind them of the forthcoming EMIs. Tewari did not mention the name of the fintech but said the lender is currently doing pilots with the entities and that the lender would formally partner if results are encouraging.
UCO Bank’s GNPA ratio stood at 4.14% as of September end, while net NPA was at 1.11%.