State Bank of India has constituted rural recovery teams (RRTs) and activated account tracking centres to aggressively undertake recoveries as bad loans jumped by Rs 5,791 crore in 2010-11 (April to March).
The bank has put together RRTs, with each team comprising up to six officials (depending on the size and complexity of bad loans), to visit villages and inquire with defaulting farmers and other borrowers as to why they have fallen behind on loan instalment payments.
NPAs increase
The urgency to tackle bad loans or non-performing assets (NPAs) in rural areas stems from the fact that of the net increase of Rs 5,791 crore in NPAs in 2010-11 those arising from the agriculture segment accounted for 38 per cent (or Rs 2,203 crore).
Further, of the total outstanding NPAs of Rs 25,326 crore as of March-end 2011, bad loans from the agriculture segment accounted for 18 per cent (or Rs 4,524 crore).
“RRTs have given us good results in certain States, especially in the northern region, where NPAs in the agriculture sector are coming down. So, we have to now roll out RRTs pan-India as this method of following up with borrowers is working in a particular geography,” said Mr A. Krishna Kumar, Managing Director (National Banking Group), SBI.
Follow-up retail borrowers
On the retail front, the bank has started account tracking centres (ATCs) in its 14 local head offices. Executives at these centres follow up with retail borrowers regarding non-payment of loan instalments.
“In some geographies, the success rate of the ATCs is about 75-80 per cent in terms of borrowers responding and paying immediately. So, diligent follow up pays and it is bearing some fruit in certain areas. As we go into the rest of the year, these centres will become more institutionalised and part of the daily routine. They are gaining more focus and relevance in the entire system,” said the SBI Managing Director.
Depending on the incidence of NPAs and the need, the bank plans to open ATCs in a few more centres.
Bad loans in the retail segment saw a net increase of Rs 211 crore, accouting for 3.6 per cent of the net increase of Rs 5,791 crore in NPAs in 2010-11.
Retail NPAs accounted for 17 per cent (or Rs 4,359 crore) of the total outstanding NPAs of Rs 25,326 crore as of March-end 2011.
Monitoring
“We have taken many steps at the ground level to monitor and reduce the incidence of NPAs. These measures started about three-four months ago. It will take about six months for the recovery efforts to start bearing fruit and showing results. By the end of this financial year, we should have a fairly good control on the NPA scenario,” said Mr Krishna Kumar.
SBI is looking to reduce its net NPAs by 25 basis points from 1.63 per cent as on March-end 2011 to 1.38 per cent by March-end 2012. The bank's goal is to have net NPAs of less than one per cent down the line.
In case borrowers don't respond to RRTs and ATCs, their accounts are automatically transferred to the stressed assets management group. This group takes further steps such as slapping notices under SARFAESI Act, filing legal cases, etc.