SBI sets up call centres for NPA recovery

With mounting pressure to set aside substantial amounts each quarter to improve provision cover for bad loans, State Bank of India is using every possible way to step up recoveries from non-performing assets.

The country’s largest lender has opened two call centres at Gurgaon and Chennai to deal with NPAs and Special Mention Accounts — those in a zone in between standard assets and NPAs. It has also set up account tracking centres at 14 local head offices. As a step to improve tracking and recovery, the bank has begun assigning SMAs and NPAs to individual staff members. “This step will ensure a sense of ownership in dealing with stress asset cases,” a senior official said.

Domestic brokerage Motilal Oswal Securities, in its review of bank performance in the third quarter, said NPAs had been increasing. Gross NPAs rose marginally to Rs 23,438 crore by end-December 2010 from Rs 23,205 crore at end- September. In 12 months, gross NPAs have grown by Rs 4,577 crore.

The banking sector’s bad loans swelled after September 2008, due to the adverse effect of the global financial crisis on companies, small and medium enterprises and households.

This brought heightened awareness in detecting stress cases early and taking corrective steps in time. SBI has formulated a new code to identify accounts from the seventh day of default.

Keeping an eye on improving banks’ ability to withstand adverse events, Reserve Bank of India asked all lenders to make 70 per cent provision on overall NPAs. It first gave time till September 2010 to do so. SBI sought, and got, an extra year to do so. It has since sought time till March 2012 to meet the 70 per cent mark.

Its provision coverage ratio, including technical write-offs, improved to 64 per cent at the end of December 2010 from 62.7 per cent in the earlier quarter. The incremental provisioning required for 70 per cent is pegged at Rs 2,000 crore, to be amortised over three quarters. NPA provisions were Rs 1,630 crore, which included additional provisions made to improve coverage ratio.

The total of restructured loans were Rs 32,750 crore. Of the restructured portfolio, assets worth Rs 4,420 crore have slipped into NPAs.