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Faced with a Rs 51,000-crore bad loans pile, State Bank of India has decided to tighten the screw on defaulting borrowers.
How? It is taking recovery action, such as filing winding-up petitions against defaulting companies and their guarantors.
SBI wants its field staff dealing with recoveries to go after loan defaulters and wring out as much of the outstanding loan as possible.
A secured creditor files a winding-up petition in a High Court when the borrower fails to repay debt.
Winding up of a company is a process whereby its normal activities are brought to a standstill. The company’s property is administered by a court-appointed liquidator for the benefit of its members and creditors.
On record
To keep tabs on the pledged security, bank staff have been asked to take photographs of the properties during inspectionand keep them in the records, said a senior bank official.
SBI will take physical possession of the assets charged to it by the defaulters to preserve their value and realise the maximum amount from their auction.
Earlier, the bank used to just take symbolic possession of a pledged asset by pasting a notice that the property belongs to it. Defaulting borrowers sometimes take advantage of symbolic possession to sell off plant and machinery and other pledged assets.
The official said, the bank may consider acquiring some properties at the reserve price for its own use when their auction fails.
In the case of loan accounts classified as doubtful, up-to-date valuation of such accounts will have to be done so that they can be showcased to asset reconstruction companies (ARCs).
A loan account is classified as doubtful if it has remained non-performing for more than 12 months. ARCs are in the business of resolving non-performing loans bought from banks and financial institutions.
Due to economic slowdown, which has affected its borrowers’ ability to repay loans, SBI’s bad loans increased by Rs 11,513 crore in FY13 to Rs 51,189 crore as at March-end 2013.
In FY13, the bank saw a gross reduction of Rs 20,480 crore in bad loans. Fresh slippages amounted to Rs 31,993 crore.
Break-up
A break-up of SBI’s bad loans portfolio shows that as on March-end 2013, mid-corporate segment accounted for 36 per cent of the total bad loans; small and medium enterprises (28.4 per cent); agriculture (19.8 per cent); retail (8.3 per cent); international (5.5 per cent); and large corporate (2 per cent).
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