Date
24 January 2017
State Bank of India is leading the charge against bad debtors. A bank official said employees have received training in borrower psychology. Photo: Internet
State Bank of India is leading the charge against bad debtors. A bank official said employees have received training in borrower psychology. Photo: Internet

Reminders not enough? Indian banks get tough with bad debtors

If you have trouble collecting from borrowers, try naming and shaming them and see what happens.

Indian banks are resorting to such tactics under pressure to cut a US$49 billion debt pile after previous efforts saw them come away empty-handed.

Reuters is reporting that stubborn small borrowers are being exposed in a publicity campaign and assets put up on big TV screens in shopping malls and public places.  

No word if big debtors are being similarly chased despite accounting for the bulk of uncollected debt.

Banks are coming under increased pressure form a government needing to speed up economic recovery and from a central bank that wants company owners to take more responsibility.

P.K. Malhotra, a deputy managing director in State Bank of India (SBI), the country’s largest bank, said his team received extra training, including in psychology, and was systematically chasing up payments and accelerating sales of seized assets.

There has been some success.

Suzlon Energy this year sold its German unit, Senvion, for 1 billion euros (US$1.1 billion) in cash, less than what it paid to buy the asset in 2011 after banks pressured the loss-making wind-turbine maker to cut its debt.

More than two dozen lenders led by SBI are looking for an investor in Electrosteel Steels Ltd, whose US$1.4 billion bank loan is strained.

Rather than “evergreening” the loan, a process of regular review and renew, lenders are getting involved in the buyer talks.

Gross bad loans at Indian banks rose to 3.1 trillion rupees (US$48.83 billion) as of end-March, or 4.6 percent of total loans, according to central bank data.

Including loans that are stressed but not yet classified as bad, total troubled loans made up 11 percent of total lending.

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