PSBs settle loans Rs12, 700 cr in FY15 under OTS

OTS scheme is mainly addressed towards retail, agriculture and micro and small enterprises

Saddled with a large pile of stressed assets, public sector banks (PSBs) settled loans worth Rs 12,734 crore for 730,000 accounts in the one-time settlement (OTS) scheme in 2014-15, to cleanse their balance sheets.

The amount banks agreed to give up for OTS accounts was close to Rs 6,000 crore, according to union finance ministry data.

PSB executives said the scheme was mainly addressed to retail, agriculture and micro and small enterprises. Given the large number of small ticket accounts, it involved a lot of process work across their networks.

“When chances of full recovery are dim, it makes sense to sit across, discuss the maximum possible recovery, subject to rules,” said the chief executive of a PSB.

It also relives pressure on customers with limited staying capacity and need of further financial support. Retail customers would no longer have the “defaulter” tag in their record with the bank and credit information bureaus, though the history about customer behaviour would remain on the books. The customer could apply for fresh credit.

State-owned banks settled dues of Rs 11,280 crore for 690,000 accounts in 2013-14 under OTS. The sacrifice for FY14 was Rs 5,100 crore, according to ministry data.

State Bank of India and its associate banks settled  loans under the scheme for 280,000 accounts worth Rs 4,433 crore of loans in 2014-15.

The instances of medium size and large units resorting to this route are few. Even if large units use OTS, the repayment period might be longer than a year and usually part of a comprehensive revamp covering operations, said a senior IDBI Bank executive.

Another way in which PSBs are trying to reduce bad loans is sale of non-performing assets (NPAs) to assets reconstruction companies. PSBs have put loans worth Rs 14,000 crore for sale. Delhi-based Punjab National Bank has the largest share here, with Rs 5,000 crore in bad loans being offered for sale in the market.

Domestic rating agency the banking systems’ Gross Non-performing assets (GNPAs) increased from 3.9 per cent as on March 2014 to 4.4 per cent as on March 2015.

They may jump up to 5.9 per cent this fiscal (by March 2016) from 4.4 per cent. This is because despite economic growth because of lagged recognition of bad assets which is resulting in slippage of more restructured accounts into dud loans.