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Now govt to focus on small borrowers in bad-loan clampdown

business Updated: May 04, 2016 15:28 IST
Mahua Venkatesh
Mahua Venkatesh
Hindustan Times
small borrowers

According to estimates of the All India Bank employees’ Association, around Rs 2 lakh crore worth of defaults, out of the total Rs 10 lakh crore, will be in the small-loan category. (HT File)

Vijay Mallya may have been in the news recently for Rs 9,000 crore worth of defaults, but there are a number of smaller Mallyas that are on the government’s watch list.

Taking its battle against non-performing assets (NPAs) — loans that do not yield returns — a step further, the government has decided to ask banks to focus on small-loan defaults, excluding farm loans, typically in the sub-Rs 1-crore category. These typically include loans to small and medium industries (SMEs), and can even be taken for something like buying a tractor or a car.

“Why should there be any differential treatment for defaulters, especially those who are wilful —whether big or small…repayment of loans is critical for the banking system and the finance ministry is looking into the issue,” a senior finance ministry official who did not wish to be identified told HT.

According to estimates of the All India Bank employees’ Association, around Rs 2 lakh crore worth of defaults, out of the total Rs 10 lakh crore, will be in the small-loan category.

The setting up of e-debt recovery tribunals (DRTs) will help the recovery process, an official said.

“Small loans that have turned NPAs must be recovered by banks. These loan accounts are thousands in number, and we have taken up the issue with the government,” said CH Venkatachalam, general secretary, AIBEA.

Slowdown in certain sectors, such as, steel, textiles and roads could lead to a further surge in NPAs. According to the RBI, the bad-asset level in the banking system could touch Rs 10 lakh crore in the fourth quarter of 2015-16. Gross NPA of state-owned banks stood at Rs 3,61,731 lakh crore as on December 2015.