Corp Bank's novel method to force defaulters repay loans

Mumbai: Walk into some Corporation Bank branches across the country and you are likely to see a few individuals with their photographs on the notice-boards, much like the wanted list that one sees in police stations. Those at the bank branches are, however, not criminals in the normal sense of the word, but simply wilful defaulters on loans taken from the bank.

Once their pictures and names are thus put on the notice-boards, the bank says the social stigma attached to it forces most to repay their loans. "We have made substantial recoveries through this method," the public sector lender's Chairman and Managing Director, Ramnath Pradeep, told reporters on Friday.

Apart from the stigma attached, "it also makes it difficult for the defaulters to get credit from other sources," he said.

Citing the example of a customer who called him up a number of times threatening suicide unless the photo and notice were removed, Pradeep said that he remained firm on repayment and the customer ultimately repaid the loan. "The customer did not commit suicide but instead repaid the loan," he said.

In FY 11, the bank has recovered or upgraded loans totalling Rs 627-crore. Of this, Rs 289-crore has been recovered while Rs 338-crore has been upgraded, a bank official said.

The bank's gross and net NPAs as at end-FY 11 have decreased to 0.91 per cent and 0.46 per cent, respectively. Last December, the bank took a hit as it was affected by NPAs in the coffee plantations sector of around Rs 120-crore.

"We have recovered Rs 80-crore of this," the bank official said. The bank will focus strongly on effecting recoveries and reducing its NPAs this fiscal, Pradeep said, adding several recovery camps have already been launched and "we are getting a good response."

Source: Financial Express