👌In a sweet spot: SBI’s upgrades 60 NPA accounts through fintechs – Banking & Finance News | The Financial Express

https://www.financialexpress.com/business/banking-finance-in-a-sweet-spot-sbis-upgrades-60-npa-accounts-through-fintechs-3312319/

Clipped from: https://www.financialexpress.com/business/banking-finance-in-a-sweet-spot-sbis-upgrades-60-npa-accounts-through-fintechs-3312319/

Counselling over a box of chocolates leads to upgradation of 13% accounts sent as pilot project.

Out of the 450 accounts sent as pilot project, the fintechs could not reach out to 250 NPA borrowers. (Image/Reuters)

State Bank of India’s (SBI) novel approach of distributing sweets and counselling borrowers to recover non-performing accounts (NPAs) have started yielding good results. The country’s largest bank has been able to upgrade nearly 60 NPAs, or around 13% of total accounts sent as a pilot project to fintech for resolution, said a senior official.

“The pilot so far has been pretty succesful and we are looking forward to expanding it,” the official said. “The purpose of sending sweets is to get a response from NPA borrowers. Usually, they reject bank notices asking for repayment of loans,” the banker said.

SBI is currently running pilots with two fintechs on this recovery model wherein the fintechs approach NPA borrowers with a box of sweets and counsel them for repayment of their loans. The official said these fintechs are “great counsellors” and speak to customers much better than perhaps bank officials do.

According to the official, out of the 450 accounts sent as pilot project, the fintechs could not reach out to 250 NPA borrowers. However, they were able to contact 200 NPA borrowers out of which 60 account holders — almost one-third of the targeted clients — accepted the repayment proposals and submitted dues resulting in a status upgrade to “standard account” from NPA.

“They (Fintechs) are better at negotiation and quite a few accounts have been upgraded, which is a better scenario because the bank can continue to have a relationship with borrower and do not have to take the legal route. Our loan book doesn’t moderate, income continues, relationship is maintained and even the customers are relieved,” the official said.

The official added that the bank will soon form a formal policy on partnership with fintechs for such recovery mechanisms and approach and inform the Reserve Bank of India (RBI) about the new policy. The bank has been running pilots with the two fintechs for nearly two months and will form a policy within the next 30-60 days, the official said.

In the September-end quarter, SBI’s gross NPA (GNPA) improved by 97 basis points on a year-on-year (YoY) basis to 2.55% whereas its Net NPA (NNPA) stood at 0.64%, lower 16 bps YoY. In absolute terms, the lender’s GNPAs stood at Rs 86,974 crore while NNPAs stood at Rs 21,352 crore. During July-September, the lender’s total recoveries and upgrades stood at Rs 4,015 crore, higher than Rs 3,607 during April-June.

While SBI is moving ahead with its unique strategy of extending sweets for recovery, another public sector lender, UCO Bank withdrew a similar circular earlier this month, which was written by the bank’s recovery official to all zonal heads, saying the lender had decided to meet and greet and offer sweets to each branch’s top 10 non-performing account (NPA) borrowers during Diwali.