‘Coercive methods for loan recovery not workable in times of pandemic’

INDUSTRY & LOCKDOWN

THE recently elected vice-president of the National Federation of Urban Cooperative Banks and Credit Societies (NAFCUB), KK Sharma, says that 20 per cent loanees of the banks are not repaying the loans, citing financial trouble due to the lockdown. In an interview with Deepkamal Kaur, KK Sharma, who is also the chairman of Citizens Urban Cooperative Bank Limited, Jalandhar, shares issues affecting the banking sector these days. Excerpts:

How is the bank business running?

Since the government wants no coercive methods to be adopted, recoveries of loans have become difficult. The willful defaulters are having a gala time. So, in a way banks have become one of the worst-hit sectors in this ongoing lockdown period. We were in the process of improving our recoveries around mid-March when the lockdown happened.

Our loanees are those who seek loans of Rs 1,000 or upwards. Petty shopkeepers, agriculturists and MSMEs – all seek loans from us. Any individual wanting to buy vehicles, plots, etc, or even doing construction work can take a loan. As of now, our biggest defaulters are schools. Since the schools claim that they are not able to collect full fee, they are not in a position to return loans to us. —KK Sharma, chairman, Citizens Urban Cooperative Bank Ltd, Jalandhar

How much is the outstanding loan?

The outstanding loan amount is slightly more than Rs 300 crore. While 80 per cent of the loanees are repaying the amount, the remaining are defaulters. Thankfully, we are financially sound and have our own funds, so there is not much of a problem as of now.

Do you think the moratorium offered by the government was a good step?

It is nothing more than a good political statement. Ultimately, neither the loanee nor the loaner will benefit out of the three-month relief period announced by the government. Some regular Class IV government employees who are getting regular wages have also stopped paying their loan instalments.

Who are your loanees? Which section is the biggest defaulter these days?

Our loanees are those who seek loans of Rs 1,000 or upwards. Petty shopkeepers, agriculturists and MSMEs – all seek loans from us. Any individual wanting to buy vehicles, plots, etc, or even doing construction work can take a loan. As of now, our biggest defaulters are schools. Since the schools claim that they are not able to collect full fee, they are not in a position to return loans to us.

Do you intend to adopt coercive methods for repayment of loans once the RBI lifts any such guideline?

No, we won’t take any harsh step against anyone at this stage. Anyone who is in dire need of finances and takes loans needs our sympathy. Also, even if we think of mortgaging his property that he pledged with us for making recovery, we will not be able to recover much. Further, even government officials, including those from the Revenue Department, who help us in recovering loans are busy these days with Covid-19 duties assigned by the administration.

How many members does your bank have? What is the position of depositors?

We have nearly 450 members of the bank. Since the rate of interest has been dropped by 2-2.5 per cent in sync with the policies for the nationalised banks, the depositors are somehow not approaching us these days.