NEW DELHI: As the moratorium period for borrowers is getting over and a portion of restructured loans are coming up for repayment, there is a general concern in the banking sector that the restructured book will be an additional challenge on the collection front.
Babu K A, Executive Vice President & Head Collections, Federal Bank, while talking to TNIE, said that a part of the restructured book may turn into NPA. He adds that a section of the borrowers finds it difficult to meet the repayment obligations.
“This was also reflected in the RBI’s (Financial Stability) report that the gross NPAs of banks may go up from current levels in the next one year to 18-month time,” said Babu. There are, however, ways of making things better, says Babu, by engaging more with the borrowers and playing the role of a good business partner and financial advisor to them.
He says the stress is more visible in MSME (loans) than in retail. In the case of retail, he says, good banks have been able to maintain the collection efficiency, which was pre-Covid. In case of Federal Bank till the end of Sept quarter, it had a collection efficiency of 96%. Babu says that lenders who have been ‘smart’ have managed to keep the retail collection efficiency more or less same as pre-Covid levels.
“You have to have ‘engagement’ plans suitable to each customer as per his/her profile. One-size-fit-all approach won’t yield results,” he says. When TNIE asked about the challenge thrown by fintech companies that have better ideas and are more flexible in their approach, Babu says that Federal Bank does not see the fintech companies as competition but see them as partners in taking banking services to a larger population. Federal Bank has collaborated with more than 25 fintech firms to acquire new customers.