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Three SMS and a phone call is all a loan defaulter would get by way of a warning before a bank sends recovery agents to his house.
The finance ministry has asked public sector banks to adopt this process for speedy recovery of loans. The directive comes at a time when banks are struggling with a sharp surge in their non-performing assets, or bad loans. "Banks wake up suddenly to find that an account has turned non-performing," a finance ministry official said. "We want them to pick up signals early and take action."
Gross non-performing assets of nationalised banks rose 3.1% of their total lending to 1.1 lakh crore in March 2012, from 2.31% of their advances, or 71,047 crore, a year ago. Last month, Pranab Mukherjee had warned state-run banks over their deteriorating asset quality.
These directives are part of the new recovery management guidelines banks have to put in place, the finance ministry official said. Under these rules, state-run banks have to appoint a nodal officer for recovery and ensure that a separate group is looking at the recovery of loss assets at the head office level.
Starting last fiscal, the finance ministry has set a 20% recovery target for every quarter. "Banks are trying their best to recover loans but processes should be made simpler so that bankers can make recoveries without being harassed by vigilance complaints later," said an executive director of a south-based state-run bank.
The finance ministry has noted that banks need to be watchful of withheld payments, return of debit cheques and withdrawal in excess of limits as signs that an account may turn bad.
"It was seen that branch managers normally side with the customer in granting temporary overdraft facility. All such activities will need to be monitored by board of directors or top management of the banks during their credit review meetings," the finance ministry official said.
Banks have been told to be more proactive at the state level and raise issue with state governments where they have sanctioned loans but projects are stuck due to statutory clearances.
"Bank chairmen have been told to meet chief secretaries or senior officials of state governments," the finance ministry official said. Banks have also been advised to replace the practice of obtaining post-dated cheques with electronic debit authorisation.
Source: EconomicTimes
The finance ministry has asked public sector banks to adopt this process for speedy recovery of loans. The directive comes at a time when banks are struggling with a sharp surge in their non-performing assets, or bad loans. "Banks wake up suddenly to find that an account has turned non-performing," a finance ministry official said. "We want them to pick up signals early and take action."
Gross non-performing assets of nationalised banks rose 3.1% of their total lending to 1.1 lakh crore in March 2012, from 2.31% of their advances, or 71,047 crore, a year ago. Last month, Pranab Mukherjee had warned state-run banks over their deteriorating asset quality.
These directives are part of the new recovery management guidelines banks have to put in place, the finance ministry official said. Under these rules, state-run banks have to appoint a nodal officer for recovery and ensure that a separate group is looking at the recovery of loss assets at the head office level.
Starting last fiscal, the finance ministry has set a 20% recovery target for every quarter. "Banks are trying their best to recover loans but processes should be made simpler so that bankers can make recoveries without being harassed by vigilance complaints later," said an executive director of a south-based state-run bank.
The finance ministry has noted that banks need to be watchful of withheld payments, return of debit cheques and withdrawal in excess of limits as signs that an account may turn bad.
"It was seen that branch managers normally side with the customer in granting temporary overdraft facility. All such activities will need to be monitored by board of directors or top management of the banks during their credit review meetings," the finance ministry official said.
Banks have been told to be more proactive at the state level and raise issue with state governments where they have sanctioned loans but projects are stuck due to statutory clearances.
"Bank chairmen have been told to meet chief secretaries or senior officials of state governments," the finance ministry official said. Banks have also been advised to replace the practice of obtaining post-dated cheques with electronic debit authorisation.
Source: EconomicTimes
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