Dhanlaxmi Bank push to recover bad loans showing results: MD

Dhanlaxmi Bank, named in the Rajya Sabha as having the highest NPA (non-performing assets) ratio among private sector banks (at 7.27 per cent), has taken strong measures to tackle the problem.

These include identifying wilful defaulters, enforcing the SARFAESI Act (which allows banks to auction properties of loan defaulters), one-time settlements, sale of assets to Asset Reconstruction Companies and filing cases with the Police and Services Fraud and Investigation Department of India.

Seeking help

PG Jayakumar, Managing Director and CEO, told BusinessLine over phone from Chennai that the bank also plans to seek help from Indian embassies overseas where the money is stashed away  and is approaching the central banks of those countries for recovery of the money. In the next couple of years, he said the [loan] advance book would get better as accretion to NPAs get arrested, lending is done carefully with strong underwriting standards and credit monitoring is stepped up.

According to Jayakumar, Delhi Police recently helped the bank recover Rs33 crore from fraudsters.

He expected the gross NPA ratio to come down to 4-5 per cent and net NPA ratio to 2.5 per cent in the next few years. This would be further reduced by enhanced credit sanctions in the retail and SME (small and medium enterprises) segments.

The gross NPA of the bank now stands at Rs550 crore and the net NPA at ₹360 crore, he added.

Reasons for default

Speaking on the reasons that led to the surge in loan defaults, Jayakumar said the management from 2009 to 2012 oversaw loan advances growing to Rs10,200 crore from Rs3,200 crore. The huge increase, particularly in 2011-12, was made ignoring basic protocols in credit approval. As a result, NPAs went up to Rs1,214 crore.

Rationalisation

In 2012, the present CEO took charge and NPA recovery of Rs652 crore took effect. The high NPA ratio is also a reflection of the reduction in advances, a conscious decision taken to rationalise the advances book and free it from low-yielding corporate advances, huge retail advances, loans for construction equipment and commercial vehicles, among others, he said.


Source : Thehindubusinessline