Banks Brace To Seize, Manage Assets

Banks are racing against time to put in place the infrastructure and prepare themselves to seize and manage borrowers' assets, till such a time they are sold. The ordinance on non-performing assets (NPAs), which is likely to be repromulgated, allows banks to seize collaterialised assets of defaulters 60 days after sending them notices to pay up.

Many banks have set up internal taskforce to identify capabilities they now require. Their anxiety stems from the fact that after 60 days of sending notices to defaulters they will be able to seize the collaterllised asset.

"The first example of taking over an asset will show wilful defaulters that we (banks) mean business," said a senior official at Union Bank of India.

Banks, state-owned, in particular are not well-equipped to manage or run entities or even takeover real estate. Many banks are thus looking at using asset recovery branches to take over the assets of defaulters. They are putting in place taskforce by beefing up their legal cells with more officers and upgrading their estate management cells.

Bank of Baroda (BoB) is opening separate cells at regional and zonal levels, dedicated to asset recovery. These will not only serve notices to defaulters, but will also undertake follow-up action. "Recovery has to become a full-time job," Anil Khandelwal, executive director of the bank, said.

Asset recovery branches, that are now dedicated to look after accounts where lawsuits have been filed, will be brought into the network to assist in the new way of tackling chronic defaulters.

Banks have also identified the need for additional support personnel including court receivers, property seizers, chartered accountants and industrial consultants who will advise banks on the disposal of industrial property such as factory premises.

"While we are not aiming at running factories and will be putting them up for sale immediately, during the interim period, between the takeover and sale of asset, we need to add value and hence the need for industrial consultants," Khandelwal said.

Many banks, State Bank of India, BoB, Union Bank of India, Bank of India, among others, have already sent out their first batch of notices. BoB is focusing mostly on NPAs of Rs 1 crore and above and between Rs 1 lakh to Rs 10 lakh.

According to BoB officials the collaterals pledged in these slabs are easily identifiable and the smaller borrowers are more likely to respond to notices sent to them. In the second stage, the bank plans to focus on defaulting assets between Rs 10 lakh and Rs 1 crore -- these have been referred to the debt recovery tribunal (DRT) and are in various stages of being resolved.