To recover bad loans,banks will now shame the guarantors too
PSU banks to publish photos of guarantors with defaulters in newspapers.
With bad loans or non-performing assets NPAs rising sharply,banks have hit upon a new strategy to force borrowers to pay their dues besides publishing photographs of defaulters in newspapers,they have also decided to put alongside pictures of those who stood guarantee for those loans.
Public sector banks have been publishing photographs with names and addresses of willful loan defaulters in newspapers and on notice boards of their branches.
These banks have now decided to give the same treatment to the guarantors of borrowers and initiate recovery measures against them for loans that have gone sour. The move comes on the heels of 39 listed banks reporting a 36 per cent rise in gross NPAs to Rs 1,79,431 crore as on March 31,2013.
On Tuesday,Allahabad Bank became the first of the banks to take this unusual step.
It published the names of three guarantors Sanjay Jain,Rajiv Jain and Surya Vinayak Hospitality Pvt Ltd who acted as guarantors of Surya Vinayak Industries for a loan of Rs 314 crore. The bank has put on auction three properties of the guarantors. The properties,one in Haryana and two in Mumbai,carry a reserve price of Rs 64.83 crore.
We feel this is an effective measure to recover the banks money. Guarantors are also equally responsible for loan repayment. We have to take recourse to this method to bring down delinquency levels, said S A Panse,chairperson and managing director of Allahabad Bank.
A Supreme Court order earlier this year specified that if a borrower defaulted on repayment to a bank,the guarantor was responsible for making good the entire loan. banks say there is no minimum loan limit below which they cannot go to enforce the new name-and-shame rule.
Banks are enthusiastic about this new method as recoveries have already shot up with the publication of pictures of just the defaulters.
UCO Bank chairman and managing director Arun Kaul said the bank has been successfully recovering money from willful defaulters. We will intensify the recovery methods through this measure, he said.
Panse of Allahabad Bank said her bank recovered Rs 900 crore in the December quarter. For the full year ended March 2013,the recovery was Rs 2,300 crore, she added. The bank has,however,not kept a record of what percentage of the recovery came from the advertisement campaigns.
A senior State Bank of India official said they too have adopted this route. Our bank has been publishing photographs of defaulters region-wise. We have found it very effective. Nobody wants to see his/ her photo appearing in newspapers in this manner, the official said.
He said the bank initially warns guarantors and borrowers that their photographs and other details would be published in newspapers if the borrowers do not clear their dues within 15 days of the notice.
The total amount stuck in deliberate defaults by borrowers has shot up to Rs 24,283 crore as on June 30,2012 as against Rs 15,324 crore in March 2011,according to figures available with the Credit Information Bureau India Ltd. This is over 13 per cent of total NPAs.
George Mathew is an Associate Editor with The Indian Expre... Read More
Share
