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 helpPG Jayakumar, Managing Director and CEO, told
According to Jayakumar, Delhi Police recently helped the bank recover ₹33 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 ₹550 crore and the net NPA at ₹360 crore, he added.
Reasons for defaultSpeaking on the reasons that led to the surge in loan defaults, Jayakumar said the management from 2009 to 2012 oversaw loan advances growing to ₹10,200 crore from ₹3,200 crore. The huge increase, particularly in 2011-12, was made ignoring basic protocols in credit approval. As a result, NPAs went up to ₹1,214 crore.
RationalisationIn 2012, the present CEO took charge and NPA recovery of ₹652 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.