NPA Recovery Interesting

 Recovering NPAs can be interesting

(The following episode is based on facts.  Names of the individuals are changed and the name of the bank and the branch are not shared. The intention of the story is to bring home the point that a loan account needs to be followed up  and a banker should never be overawed by the position that the borrower might hold. Not intended in any way  to demean or disrespect any profession in the process including the positions described in the episode. My sincere and unconditional apologies, if the story is perceived by anyone in that way.)

Ganesan (G) was posted to a famous Tier 2 city branch of a public sector bank (PSB) X in Tamil Nadu in 2002. Though the NPA crisis of late 1990s moderated by then and the banks started finding viable projects for lending,  the reductions in GNPAs were mainly on account of write offs. The bankers of the day struggled for recovering money from the stressed assets. The challenges in recovery were multifold and each case was different. So G adopted different strategies. One such episode is given here. 

On perusing the NPAs, G found that there were some personal loan accounts, where regular recovery was seen in the first 3-6 months only and the said accounts remained sticky thereafter. One of the loan accounts was extended to one Mr. Y. An amount of Rs.50,000 was sanctioned as a clean loan two years before and except for the Rs.2000 repaid, one month after disbursal, no credits were received in the loan account.  G enquired with his assistant manager for advances and the manager of the division concerned as to why no follow up was done. They said "Mr. Y is now a Judicial Magistrate of one of the Judicial Magistrate Courts in the city". The registered  letters sent to his residential address were returned with a narration "addressee moved over to another address". The assistant manager advances confirmed that Mr. Y is continuing in the same position.

Since the officers concerned were reluctant to do further follow up, G decided to plunge himself in. He visited the Court the next day and informed the PA (Head Clerk?) that he would like to meet the Magistrate in his chamber during  adjournments. The conversation between the two was like this: 

PA: Normally the Magistrate do not entertain anyone in his chamber

G: Please request him as we would like to talk about his 'deposit' accounts maintained with our bank X.

The PA came back with the answer that Mr. Y gave an appointment for five minutes during the first break. 

At 11.15 am, G was called inside the chamber. 

G: Good morning Sir.

Judge Y: I do not remember to have any deposit account with you. Is it any court deposit you want to discuss. 

G: Sorry Sir. By mistake, I informed that it is a deposit account. Actually it relates to a loan of Rs.50000 availed by you. (It was not a mistake. G did not want the PA to know about the loan availed by Mr. Y)

Y: Okay. Please tell.

G: The loan has become NPA. Our regional office is insisting that cases should be filed in respect of all personal NPAs.

Y: mmm..

G: We have to file the personal loan NPAs in the Munsif Court  We are a bit worried as your loan account is one of them.

Y: (Taking a pause, trying to smile) What is the present outstanding?

G: Rs.56525 as on date including interest.

Y: My PA will call you tomorrow.

Y indicated that the meeting is over. The next day, X bank received cash of Rs.25000 for credit into the loan account of Mr. Y.

As no further credits were received, after a gap of three months, G made a similar request for a meeting in the chamber, at a time convenient to Mr. Y. The request was not considered favorably but X Bank started getting regular credits into the account and the loan itself was closed within a short time. 

Next week, I will share another interesting strategy adopted by G in recovering an education loan account (that was prior to introduction of NPA norms in the banks)

Regards 

V. Viswanathan.

5th May 2023.