Major Public Sector Banks Collaborate to Establish a Single Small Loan Recovery firm

 Banks in the public sector are making a lot of effort to recover problematic loans. The performance and balance sheet of banks are adversely affected by these problematic loans. Public sector banks are currently planning to establish a single company for loan recovery. The State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda, and five other significant public sector banks (PSBs) in India are joining together to establish a pooled collecting agency. 

 Recovering retail and MSME (Micro, Small, and Medium Enterprises) loans under Rs 5 crore would be the primary emphasis of this new company. This partnership aims to streamline and increase the efficiency of the smaller loan recovery procedure. Banks will work together under a single agency rather than handling loan recovery independently.

style="font-family: arial;">For loans made to people and small enterprises, this will lower expenses and increase recovery rates. PSB Alliance Pvt Ltd, a business established by several banks to collaborate on projects, is managing the project. Sources with knowledge of the strategy said PSB Alliance will first develop a "proof of concept." In order to assess how this shared collection firm will function and how it can best handle loan recovery, they will create a working model or pilot.

Once the initial phase is successful, more public sector banks are expected to join the effort and become part of this unified loan recovery system. This collaborative approach aims to help banks better manage their loan portfolios, especially for smaller loans, which can be challenging to recover individually.

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Attack on the Bank of India(BOI) Loan Recovery Team

A Bank of India team was violently attacked in Farrukhabad during what should have been a routine debt recovery exercise, underscoring the increasing difficulties that bank officers occasionally experience in the course of their work. In a matter of minutes, the normally tranquil environment around the Sai Dham Temple at Panchal Ghat descended into chaos.

Under the direction of the branch manager, the bank's debt recovery team had gone to collect a pending loan balance of about ₹4 lakh from a local borrower. Avnish, a PRD jawan and inhabitant of Rakabganj Khurd in the Maudarwaja area, accompanied the squad. During the visit, he was responsible for maintaining order and ensuring security. But things didn't work out as expected. People who were thought to be the borrowers who had refused to pay the debts confronted the crew as they got closer to the scene. A startling change in circumstances ensued. Avnish was allegedly grabbed by the accused and beaten. The bank manager and other team members had to leave the area in their car since the situation rapidly got out of hand.

Avnish was later taken to the hospital for medical examination. The police station under whose jurisdiction the incident falls—Qadri Gate police station—has registered the case and launched an investigation. Preliminary statements from Avnish suggest that the accused deliberately attacked the team to avoid repaying the loan.

This incident raises serious concerns about the safety of bank officials and staff engaged in fieldwork, especially in loan recovery. Bank personnel are increasingly facing resistance, and sometimes violence, while performing their duties. Though they operate within legal frameworks, such situations pose not only a professional hazard but a personal one too.

The case also sheds light on the need for better support mechanisms and legal protection for recovery agents and officers. It emphasizes the importance of ensuring the safety of those working on the frontlines of the financial system.

Authorities have assured that strict action will be taken against the accused. In the meantime, this incident should serve as a wake-up call for financial institutions to review their recovery strategies and for law enforcement to provide necessary backup when required.

Loan default is a serious issue—but violence is never the answer. Respecting the rule of law and engaging in peaceful resolutions must always be the priority, both for banks and for borrowers.

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Useful tips to recover bad loans/NPA Acs

1.Every branch should maintain a master file having the lists of eligible star sanjeenvani accounts for the year, monthly sascal and NPA borrowers. The Lists should be sorted village wise. While going for recovery, our focus should not to cover many villages, rather to cover a single village and meet with each and every single account of that village coming under the three lists.

2. Ensure to get the mobile phone number of the borrower immediately. If the borrower is not available, then get their family members contact numbers.  Please make a note if there is any landmark near the borrower’s residence. Ensure to update these details in Finacle DC for future purposes.

3.Whosoever is going for recovery, always carry with yourself the below set of things – Mobile number updating forms , L444C or any other loan renewal document , OTS offer letter , Cash deposit and withdrawal challans. This comes easy to deal with borrowers.

4. What I believe that there is no use of visiting the same customer again and again , Identify and try to read his mind during the first visit only  that what type of customer he is and what’s the way to handle him in future like follow up through phone only , regular visits , settlement ,any legal action etc.

5. Whatever is the promises and dates of borrowers, note their words , take their signature and after returning to the branch, update the same in the master file so that whosoever is the next person going for recovery, has some baseline. Also try to know what will be the source of repayment according to the customer. If it is karkhana or any other person, try to contact them also.

6.Whosoever is going for recovery, avoid going inside the house and ensure that the communication should be outside the house only so that the passers and neighborhoods see that the bankers visited that particular household. Some borrowers are very sensitive about their images.

7. At least in a week, use Hacs menu and figure out the credit balances present in the saving account of NPA accounts. Transfer the balances immediately and reduce the NPA figures of your branch.

8. Also on daily basis, before proceeding for day end have a look at the cash vouchers and check if there any recovery in NPA account and parked in the office account . If it is so, immediately appropriate it to the account and reduce the NPA figures of your branch.

9. If at some day you feel that today Karkhana is releasing sugar payments or employees will get salary today and possibly customer can withdraw money from ATM, then at frequent intervals run menu – LADSP (LOAN DEMAND SATISFACTION PROCESS) . This will satisfy the demand raised in the loan account from the saving account of the customer and no need for waiting till day end.

10. As soon as you receive the first sascal list from the controlling office , address the technical sascal first as it will bring down the figures of your list and of course ,lesser will be the pages of sascal, lesser will be our tension.

11. Always understand Time value of money, There are many cases where we unnecessarily wait to get more money and later we lose that money also what we were previously getting. It’s the need of the hour that we cannot wait and increase the age of NPA unnecessarily. Always remember, A stitch in time saves nine.

12.  You can only exercise your power when you know what is your power ?  Modified NPA management policy and Liberal OTS schemes are now available. Be decisive, get the thorough study and utilize it fully.

13. I understand that it’s extremely difficult to initiate legal action for every NPA account. But at least Pick 2,3 strong cases and start the legal action. If it is Sarfaesi , immediately go for 13(2) , pre possession and drag it till the day of paper publication and E auction. Let there will be a fear created amongst the borrowers that we bankers can do everything when it comes to saving our mother institution. If every branch will do at least 2,3 such cases , many NPA borrowers will upgrade their account due to fear . Also publicize your action in such a manner that it will reach in the ear of each and every NPA borrower. Do less Sing more.

14.  Education loan students are very image conscious. When we go to their residence for recovery, often they will be at some other place for job. Try to take out the details of their job and company. After returning, spare some 10-15 minutes and try to figure out the company’s profile by using the social networking. If possible, try to contact them through their official email ids.It will create a fear in them of losing the job as these companies are very conscious of their images .

15. There are many customers of the branches who require regular visits and they wait till the last day and every time they come in sascal, intimate them that whatever the cost involved in the regular visits, bank will recover them from their loan account as follow up charges. Make a note of their visits,take their signature and if possible, recover them also in some cases as follow up/notice charges.

16. At last I would like to say that recovery is a long continuous effort. *Focus should be on recovery not on reporting* . Most of the times , efforts for the day will bear fruits in the next week and possibly credit goes to the person who will visit the borrower on that day . But that should not bother us. After all we all work for the same purpose.

Source-Blog reader

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Banks has No powers to use Bouncers to Recover Loans

No one has any power to appoint any musclemen or bouncers for recovery of loans forcefully,” Union Minister of State for Finance Anurag Thakur said in the Lok Sabha on Monday.

Thakur said the RBI has issued ‘Guidelines on Fair Practices Code for Lenders’ which are required to be adopted by banks, duly approved by their Board.

“The said circular prohibits lenders from resorting to undue harassment in recovering loans, viz., persistently bothering borrowers at odd hours, use of muscle power for recovery of loans etc,” he said.

The minister said with regard to complaints, the RBI has informed that complaints received by it regarding violation of the said guidelines and abusive practices followed by banks’ recovery agents are viewed seriously.

“In such cases, the RBI can consider banning the bank concerned from engaging recovery agents in a particular area for a specified period.

“In case of persistent breach of above guidelines, the RBI can also consider extending the period or the area where the bank concerned is barred from engaging recovery agents,” he said.

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Public sector banks recover Rs 1.2 lakh cr from bad loans in 2018-19

Public sector banks (PSBs) have recovered close to Rs 1.2 lakh crore from stressed assets during the financial ended March, primarily helped by resolution under the Insolvency and Bankruptcy Code (IBC), an official said. During the first half of the previous fiscal, banks recovered Rs 60,713 crore from bad loans. "Due to non-resolution of some big accounts referred under NCLT (National Company Law Tribunal), PSBs could not achieve the resolution target of Rs 1.80 lakh crore. But, these accounts should be resolved in the current financial year," the official said.

Banks recovered close to Rs 55,000 crore from the NCLT resolution, the official said. "Compared to Rs 74,562 crore in 2017-18, the recovery in the previous financial year nearly doubled to Rs 1.2 lakh crore," the official said.

Two large accounts of Essar Steel and Bhushan Power & Steel Ltd are still pending to be resolved. It is expected that these two accounts should be resolved in the next few months and recoveries from these could be around Rs 50,000 crore. JSW Steel had revised its offer from Rs 11,000 crore to Rs 18,000 crore and later to over Rs 19,000 crore, whereas Tata Steel's last offer was at Rs 17,000 crore after it had refused to revise its bid. ArcelorMittal has made a bid of Rs 42,000 crore for Essar Steel.

According to the official, consolidation among public sector banks and higher recoveries by state-owned lenders will be on the government's agenda in the current financial year. Referring to the liquidity crisis in the non-banking financial companies (NBFCs), the official said that there are issues with both solvency and liquidity in these companies.

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Bank of India(BoI) hopeful of Rs. 1,800-crore write-back

In the run-up to the close of financial year 2019, Bank of India is expecting a provisioning write-back of more than ₹1,800 crore from the resolution of Essar Steel assets and an inflow of ₹400-500 crore from the sale of non-core assets.

The public sector bank has made 100 per cent provisioning towards the Essar Steel account. Bank of India (BoI) MD and CEO Dinabandhu Mohapatra said: “Our bank’s provision coverage ratio (PCR), at 76.6 per cent, is the highest in the banking industry. We are quite hopeful of a write-back of more than ₹1,800 crore from the resolution of this account.”

BoI’s non-core assets include STCI Finance and Star Union Dai-ichi Life Insurance Company. The bank’s non-core investments include Central Depository Services (India), and ASREC (India), an asset reconstruction company.

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Bank of India (BoI) put on sale its exposures to Essar Steel & other NPA acs, Up to Rs 8,831 crore

Bank of India (BoI) on Wednesday put on sale its exposures to Essar Steel, Bhushan Power and Steel and Alok Industries along with 38 other non-performing assets (NPAs) worth a total Rs 8,831 crore. Although Essar Steel has attracted a fairly reasonably bid of Rs  42,000 crore from ArcelorMittal, BoI is probably concerned about the delay in the resolution process. All three accounts, part of the Reserve Bank of India’s (RBI) first list of large NPAs, remain unresolved over a year since the list was issued amid several rounds of litigation. BoI’s exposure to Essar Steel, including foreign currency loans to its Cayman Islands subsidiary, stands at Rs 1,492 crore.

The Bhushan Power exposure includes foreign currency loans extended through the bank’s Hong Kong, New York and Tokyo branches and adds up to Rs 2,441 crore. BoI’s exposure to Alok Industries is Rs 621 crore. Last week, State Bank of India shelved its plan to sell its over Rs 12,000-crore exposure to Essar Steel following a National Company Law Appellate Tribunal order on Friday. In June, Bank of Baroda had moved to sell its Rs 1,200-crore exposure to the indebted steel company.

BoI has also put on the block a bunch of exposures to companies named on the central bank’s second list, including Asian Colour Coated Ispat (Rs 191 crore), Jai Balaji Industries (Rs 124 crore), Orchid Chemicals and Pharmaceuticals (Rs 340 crore), Uttam Galva Steel (Rs 199 crore), Visa Steel (Rs 67 crore) and Wind World (India) (Rs 126 crore). Also on the list is GMR Chhattisgarh Energy (Rs 562 crore), which is one of the 11 large power accounts lenders and power producers are trying to resolve, and Binani Cement (Rs 61 crore).

All the accounts are being offered on a 100% cash basis and for the Bhushan Power and Essar Steel accounts, BoI also intends to retain an equity stake to benefit from an upside. So far, a full resolution has been reached only in the cases of Bhushan Steel, Electrosteel Steels and Monnet Ispat & Energy from the first RBI list of 12 accounts.

While excessive litigation has delayed the resolution in some accounts, others, such as seven of the 11 large power projects have not achieved resolution because of a lack of consensus among lenders. As a result, banks continue to resort to sales to asset reconstruction companies (ARCs). The only large account of over Rs 2,000 crore to be resolved outside the insolvency court before the RBI-mandated deadline of August 27 was Bombay Rayon Fashions, which was sold to JM Financial ARC at a 60% haircut.

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IBC resolve large amount of NPA, Banks recover more than half of their money

Creditors have recovered Rs 49,783 crore, or almost 56% of their admitted claims, from 32 stressed companies where insolvency resolution plans were approved by the National Company Law Tribunal (NCLT) by the end of June, showed data compiled by the insolvency regulator.

Despite the average 44% haircut that the creditors in general had to take in these cases, analysts said the Insolvency and Bankruptcy Code (IBC) has performed much better than the earlier system where the recovery process was strenuous and yielded too little. Of course, the headline numbers are good primarily because of Bhushan Steel, which accounted for close to 64% of the total claims by these 32 firms and an equal amount in recovery.

Financial creditors, such as banks, have managed to recover Rs 47,768 crore, or a little over 55% of their claims, showed the data by the Insolvency and Bankruptcy Board of India, compiled on the basis of the inputs provided by resolution professionals (RPs). Operational creditors — including raw material suppliers — have received Rs 2,015 crore, making up for 61% of their claims.

Financial creditors, expectedly, made up for the bulk (96%) of the total claims admitted by RPs. “The IBC is way better than the earlier system, where recovery used to take a lot of time, and wherever a one-time settlement took place, the amount was usually not more than 20-30%. Also, many stressed firms were allowed debt restructuring, which further worsened their state of health. In contrast, the IBC stipulates a time-bound resolution of default cases, which is good,” said Manoj Kumar, partner and head (M&A and insolvency resolution services) at consultancy Corporate Professionals Capital.

However, analysts said the ratio may change for the worse in the coming weeks once the resolution process of some of the large stressed companies such as Bhushan Power and Steel, Lanco Infratech and Alok Industries are factored in, as haircuts in these cases are expected to be much higher. For instance, against the admitted claims worth Rs 47,000 crore by financial creditors, the highest offer (by JSW Steel) is only Rs 19,350 crore. Lanco Infra, with Rs 45,263 crore in debt from financial creditors, is feared to be heading for liquidation as the lenders have reportedly rejected an offer. In case of Alok Industries, against the debt of Rs 29,500 crore, Reliance and JM Financial have placed a joint bid of only Rs 5,050 crore.

Nevertheless, once these old cases — where chances of a grand turnaround without massive investments are remote — are settled and new cases come in, recovery would be much higher, a senior government official said. This is because creditors can invoke insolvency proceedings against defaulting firms very early when chances of turning them around would be much higher and easier.

Interestingly, in nine of these 32 cases, insolvency proceedings were triggered by the corporate debtors themselves, while 14 were by financial creditors and nine by operational creditors. As many as 12 cases were handled by the NCLT’s Kolkata bench, and eight by the Mumbai bench.

Source- Financial Express

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