Defaulters beware, banks across the spectrum are now going the extra mile to recover bad loans.
The net bad assets of 40 listed banks across the country rose by 38 per cent, from Rs 93,108 at the end of the last fiscal to Rs 1,28,533 in the first half of the ongoing fiscal. The situation was made worse by the global slowdown and is being monitored closely by the government, which has asked banks to set up separate verticals to recover dues from written-off accounts. For their part, banks have adopted different methods to recover their money.
Besides taking detailed financial details of the borrowers from credit rating agencies, they have also started hiring detectives/agencies and putting up name and shame posters of defaulters and guarantors in their residential localities. Detective agencies are being hired to find out if defaulters have undisclosed assets that could be attached to recover the loan.
According to sources, banks are resorting to legal options as well, including the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, (Sarfaesi Act, 2002). This empowers banks and financial institutions to auction off residential and commercial properties of borrowers when they fail to repay their loans.
Recently a consortium of banks, with a huge loan exposure with an airline, attached several properties to partly recover their bad loans. The recoverable loans were about Rs 7,000 crore.
According to NPAsource.com, a private portal that tracks NPAs, the non-performing assets (NPA) of the 40 listed banks are likely to cross Rs 1.5 lakh crore by the end of the fiscal.
As of September, the gross NPAs stood at Rs 2,29,007 crore, which is 27 per cent higher than the Rs 1,79,891 crore in March 2013 for these 40 listed banks.
Of the 40 banks, 14 have reported more than 50 per cent jump in their net NPAs during the first six months of the current financial year.
According to the portal, gross NPAs of listed banks have doubled since September 2011, while net NPAs have risen by 140 per cent in the same period. In the second quarter, top public sector banks like State Bank of India, Bank of Baroda, Punjab National Bank, Central Bank, IDBI Bank and Union Bank reported more than 30 per cent rise in net NPAs.
“Instances of loan defaulters are rising because of poor business sentiment and activity. Those who borrowed just before the downturn are the worst affected. That is where we see the maximum number of defaulters,” a senior official with a mid-size public sector bank said, requesting anonymity. “We have hired detective agencies to identify the undisclosed assets of certain customers. These can be attached to recover our loan exposure in part or full,” he added.
The NPA situation has truly reached worrisome levels, and Finance Minister P Chidambaram has said banks should ‘hand hold’ those borrowers who are genuinely affected because of the global downturn, but be firm with ‘wilful’ defaulters.