SBI chasing smaller borrowers to control rising bad loans

When push comes to shove, even small borrowers seem important for big banks. State Bank of India (SBI) is chasing hundreds of small borrowers to recover bad loans, as the country's biggest lender intensifies its efforts to control non-performing assets (NPAs). So, on its list is a snacks shop, a book store, a stone crusher and a theatre owner.

The state-run bank's fight against NPAs is not restricted to the high and the mighty at a time when bad loans are fast climbing. SBI has been using every option available including selling bad loans to asset reconstruction companies and employing professional firms or specialists to help turn around stressed cases. Now, it is going after small borrowers.

According to people familiar with the development, SBI has issued hundreds of notices to small NPA account holders in the past two months. These borrowers include Lucknow's Ganesh Book Depot, Rourkela's Sharada stone crusher, Kanpur's Vrindavan Namkeen Bhandar and Anita Doodh Dairy, Madurai's Indhu Coffee, and Gorakhpur's Moti Theatre and Singh Tent House.

These notices have been issued under the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Act, 2002 (SARFAESI Act), which allows banks to go after defaulters without the involvement of a court or debt recovery tribunal. The law empowers banks to take over and sell the assets of defaulters, if needed.

SBI Chairman Arundhati Bhattacharya has made controlling bad loans her top priority, as an economic slowdown has pushed NPA levels sharply higher. The bank has a special department called the 'Stressed Asset Management Group' under Deputy Managing Director Soundara Kumar to tackle bad loans. Two chief general managers -Rajeev Krishnan and C.B. Balaji - have also been assigned the task of controlling stressed assets.

Growing bad loans is the biggest headache for banks, especially state-run lenders. SBI's gross NPAs were at 4.75 per cent (Rs 51,189 crore) of total lending and net NPAs at 2.10 per cent (Rs 21,956 crore) in 2012/13. Smaller accounts and small and medium enterprises form the third-highest category of bad loans at SBI with a share of 7.16 per cent, after agricultural loans (9.39 per cent) and mid-size companies (8.67 per cent).