New Stress Pockets

Unsecured personal loans, credit cards, business banking, and MSME loans are emerging as new breeding ground for banks' NPAs. How serious is the problem?

- ANAND ADHIKARI

Prone to Default

MSMEs 18,33,435

Personal loans 7,79,891

Credit Cards 1,16,290

Consumer Durables 7,242

(In ₹ crore); MSMEs include priority sector; Personal loans as of Feb 2021; Source: RBI

IN a large Mumbai-based private bank, collection and recovery targets for executives in the credit cards and personal loans division have doubled this year. The bank is using advanced data analytics and engaging with multiple new-age technology firms in risk management. It is analysing granular data of Covid-hit states for exposure in home or personal loans, nature of employment of borrowers (services or manufacturing), and impact on income post the Covid second wave.

The delinquency management strategy of the bank includes a “collection strategy” for loans under default between 90 and 180 days. The 180 days plus default accounts will straightaway move to recovery using legal remedies or selling to asset reconstruction companies (ARCs). “There is pressure on keeping delinquencies low by proactively reacting to stress cases by selling loans to ARCs or exploring other legal remedies,” says a market player aware of the bank's collection strategy. The bank knows this time round the government or the Reserve Bank of India (RBI) is not likely to be as sympathetic as it was last year.