NEW DELHI: As the moratorium period for borrowers comes to an end and some of the restructured loans come due, there is widespread concern in the banking industry that the restructured portfolio will pose an additional challenge on the collection front.
Babu KA, Executive Vice President and Head of Collections at Federal Bank, in an interview with TNIE, said that part of the restructured book may turn into NPA. He adds that some borrowers are struggling to meet repayment obligations.
“This was also reflected in the RBI (Financial Stability) report that gross NPAs for banks could fall from current levels over the next year to 18 months,” Babu said. There are ways to improve things though, Babu says, by engaging more with borrowers and acting as a good business partner and financial advisor to them.
He says stress is more visible in MSMEs (loans) than in retail. In the case of retail, he says, good banks have been able to maintain collection efficiency, which was pre-Covid. In the case of the Federal Bank until the end of the September quarter, it had a collection efficiency of 96%. Babu says lenders who have been “smart” have managed to keep retail collection efficiency more or less the same as pre-Covid levels.
“You need to have ‘engagement’ plans tailored to each client based on their profile. A one-size-fits-all approach will not yield results,” he says. When TNIE asked about the challenge of fintech companies that have better ideas and are more flexible in their approach, Babu said that the Federal Bank does not see fintech companies as competitors, but considers them as partners. to bring banking services to a wider population. Federal Bank has worked with more than 25 fintech companies to acquire new customers.