In a novel way to recover bad debts, Vijaya Bank expects to open the sticky issue of recovery to all its employees. Employees, irrespective of cadre, can attempt recovery. And this would carry an incentive, which will be a percentage of the recovered amount.
Vijaya Bank has more than doubled its recovery target of bad debts to Rs 1,000 crore for the current financial year compared with the previous year. The bank currently has about 11,000 employees across 1,200 branches.
“Why pay asset reconstruction companies to dispose of bad debts when our employees are better in recovering the bad debts,” Mr H.S. Upendra Kamath, Chairman and Managing Director, Vijaya Bank, told
The new Chairman said 1-5 per cent of the recovered amount will be a good incentive for the employees to try their hand at recovery. However, employees would need to do this in addition to their regular work, Mr Kamath said.
The bank recovered about Rs 480 crore last year without any cash incentive.
Cash incentive would be an inducement for the employee to put in more efforts in recovery, he said
New norms
Vijaya Bank will have to set aside about Rs 80 crore on account of the new provisioning norms prescribed by the banking regulator.
The bank's total bad debts were at Rs 1,259 crore (2.5 per cent) and net non-performing assets were Rs 741 crore (1.52 per cent) for the year ending March 31, 2011.
The RBI had recently raised the provisioning requirement across categories of advances.
For instance, the provisioning for loans where interest is overdue for over 90 days has been raised by five percentage points to 15 per cent. Similarly, for bad loans not backed by collateral, the provision requirement has been raised by five percentage points to 25 per cent.