Public sector banks are strengthening their recovery mechanisms in the face of rising bad loans. Increased recoveries will add to their bottom line starting the third quarter of this fiscal, they say.

Banks including SBI, Central Bank of India and Bank of India have already put in place special teams to interact with top defaulters and speed up the recovery process.

In fact, Central Bank of India Chairman and Managing Director (CMD) Rajeev Rishi and Bank of India CMD Vijaylakshmi Iyer are personally looking at the mechanisms to get back money from defaulting borrowers.

“We have formed special squads comprising two teams in regional offices. While one team takes care of the legal aspects the other is the mobile team, which goes to the field. I have met the top 30 borrowers of my bank. Similarly, all my zonal heads and regional heads have met the top 30 borrowers in their respective areas,” Rishi said.

So far this financial year, recoveries made by Central Bank of India have exceeded Rs 880 crore.

Vijayalakshmi Iyer said Bank of India has made recoveries to the extent of Rs 1,400 crore.

Amid a slowing economy and clearances on projects not coming through (which has resulted in slower cash flows), major PSU banks have been burdened with a high stock of bad loans in sectors ranging from infrastructure and roads tosteel.

Impaired assets, including restructured loans, of PSU banks rose from 6.8 per cent of total loans in March 2009 to 12.1 per cent in March 2013. Fitch Ratings expects bad loans to rise to 15 per cent by March 2016.

The bad loan ratio of PSU banks (at about 4.5 per cent) is more than double that of private sector lenders. NPAs or the non performing assets have jumped in the current financial year.

P. Srinivas, Executive Director at Bank of Baroda, said, “With the quantum of stressed assets rising, we have increased the staff strength and field officers. We have also appointed an Additional General Manager for recoveries. The process is being speeded up and we are frequently monitoring the accounts with the increase in number of (bad loan) accounts.”

SBI too has ramped up various verticals in the risk management department, starting with identification, measurement, control and mitigation of risk, R. Venkatachalam, Chief Credit & Risk Officer and Deputy Managing Director, State Bank of India, had said at an annual banking conference last month. Even the biggest of companies are facing cash flow issues as the economy is passing through a tough phase, he said. The bank has developed 27 risk models for various types of activities and industries.

According to a study by online portal NPAsource.com, the net bad assets of 40 listed banks have jumped 38 per cent to Rs 1.29 lakh crore during the first half of this fiscal, from Rs 93,109 crore at the end of the previous fiscal.

This is likely to cross Rs 1.5 lakh crore by the end of the current fiscal, the study said.

Further, after the failure of repayments by big companies including Kingfisher Airlines, Lanco Infratech and Deccan Chronicle Holdings, to name a few , RBI had asked banks to step up the recovery process.

> beena.parmar@thehindu.co.in

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