Banks make loan recovery plans amid coronavirus outbreak


The State Bank of India (SBI), for example, is considering a merger with the postal department to reach the bank’s vast customer base.

Livemint, Bombay | By Gopika Gopakumar

POSTED ON JUNE 01, 2020 08:25 IST

Banks and non-bank financial corporations (NBFCs) in India are developing new strategies as they prepare for the challenge of recovering their retail loans amid widespread disruption in household income due to the coronavirus crisis.

Most of these financial institutions are reallocating existing staff to pursue low-cost borrowers after foreclosure measures and the six-month moratorium on loan repayments are lifted.

The State Bank of India (SBI), for example, is considering a merger with the postal department to reach the bank’s vast customer base. SBI is also seeking to hijack its trade correspondents for the collection of agricultural loans, according to a senior bank official. Currently, SBI has nearly 60,000 business correspondents who assist with account opening, remittances and other basic banking operations. The bank has already carried out a pilot project in Maharashtra and is looking to expand this project nationwide.

“There is a need to put in place a mechanism to improve the efficiency of collection and also to sensitize borrowers to repay on time. From now on, collections are made in branch. It is time that we engage with more business correspondents in this way so that there is a steady cash flow and accounts are not stressed, ”said a senior bank official, who requested the anonymity.

Bajaj Finance Ltd, one of the largest NBFCs in the country, is also looking to increase its fundraising capacity. In its May 19 call for results, management said it had used the past two months to strengthen its fundraising capacity.

“We are adding nearly 2,800 company agents to this activity,” said Rajeev Jain, Managing Director and CEO. Due to the lockdown and the inability of clients to pay in cash, the bounce rate of this portfolio fell from an average of 19% in January, February and March to around 86% in April and May.

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