Banking on staff for recovery

Lenders are dedicating full-fledged teams to curtail the threat of rising defaults

Every day, between 7.30 pm and 11 pm, a top official of a public sector bank gets text messages from 46 zonal managers. The messages contain details on recovery figures of respective zones, with additional information on ranking of centres, based on recoveries.

The zonal managers have to send these numbers daily. Failure to do so will see an email from the chairman’s office seeking the details.

The official says he has been doing this chore daily for the last one year. This helps keep a tab on the accounts which have slipped into the non-performing asset (NPA) category.

This is not a one-off incident. Banks reeling under asset quality pressure have beefed up recovery efforts. And, it has percolated to the ground level. Branch level staff are also being deployed for collection of dues.

“We have a recovery team of about 200 employees. Of this, a majority were redeployed from other departments in the third quarter,” said B A Prabhakar, chairman and managing director of Andhra Bank. The bank is targeting a recovery of at least Rs 500 crore this quarter through its in-house team.

The last two quarters of a financial year have always seen a flurry of activity for credit deployment. However, the situation is different this year. With the slackening of credit demand due to high interest rates, hectic activity is being seen on meeting recovery targets.

Lenders are also resorting to referring bad accounts backed with securities to Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (SARFAESI) processes.

Nupur Mitra, chairperson and managing director at Dena Bank, said the bank was using SARFAESI and one-time settlements in a big way. “We are also holding massive lok adalats for small accounts,” said Mitra. The bank has deployed clerical staff and nodal officers to do the task.

In rural areas, some banks are asking customers, while extending fresh loans, to at least pay the minimum interest to avoid the loan slipping into the non-performing category.

Bankers say since asset quality pressure is more in the agriculture and small and medium enterprises (SME) segments, maximum recovery efforts are given in these two categories.

State Bank of India (SBI), the country’s largest lender, which had gross NPAs of Rs 40,000 crore at the end of December, has seen 19 per cent of its bad loans in the farm sector and 28.7 per cent in the SME sector. SBI’s cash recovery and upgradation in the December quarter was about Rs 2,000 crore, compared to Rs 1,430 crore in the year-ago period.

The thrust on recovery also comes at a time when not much activity is seen in the stressed asset sale market, after RBI issued guidelines in October 2007, stating banks while selling NPAs, have to work out the net present value of the estimated cash flow associated with the realisable value of the available securities net of the cost of realisation. The sale price, generally, should not be lower than the net present value.

“We were able to recover 100 per cent of principle in accounts, where the offer from asset reconstruction companies was at 30 per cent,” said Sounadra Kumar, deputy managing director, SBI. “Given this experience, the preference is for in-house effort than sale of bad loans,” she added.