Demonetization of Rs1,000 and 500 rupees currencies is proving to be boon for bad-loan ridden banks, as several ‘otherwise’ cash rich borrowers not paying their loans were seen queuing up to clear their dues with old notes.
Many banks have claimed that some movements have been observed in small-sized pending loans, where recoveries are taking place.
“This type of loan payment has been observed largely in PNPAs (Potential Non-Performing Assets). As far as my bank is concerned, we have seen that borrowers, whose pending loan size was less than Rs10 lakh, were seen as most interested in paying their loan back. We have got a recovery of little over Rs10 crores against our entire such loan amount of anywhere between Rs400-450 crores in Jharkhand. Though amount might not be sizeable, but the indication is remarkable,” said public sector lender Allahabad Bank DGM SK Singh on Thursday.
Bankers also believed that a large fraction of black money hoarders was targeting those small borrowers who have defaulted to pay their loans back to banks, so that their black money turns white through these borrowers. An official claimed that such hoarders were targeting those who have not paid their home, car or personal loan installments for some months.
In a layman’s word, PNPAs are the loans which, banks believe, are most likeably going to become as NPA. Banks put loans under PNPA when the installments for those loans have not been paid for more than six months. Singh said that though there were no movements in large-sized PNPAs, small-sized borrowers were seen depositing blocked installments against their loans after Rs1,000 and Rs500 denomination notes were demonetized on November 8.
According to RBI guidelines, deposit of demonetized notes into all types of deposit/loan accounts is allowed. Anybody depositing more than Rs50,000 in cash in their bank account has to submit a copy of the PAN card in case the bank account is not seeded with PAN.
An official at SBI, Kishoreganj branch, said that a customer, who had defaulted on paying education loan for his son, came with dirty cash to clear his dues.
Echoing a similar view, a senior officer of Punjab National Bank (PNB) said that small-sized pending loans were seen being cleared. “However, this has not turned into a trend yet, which is both surprising, and not so surprising at the same time. It is surprising, because we expected that borrowers would use this opportunity in clearing their pending loans. However, we have also seen borrowers exhausting their energy in sitting with tax consultants and others to decide their further course of action,” said PNB DGM SK Pradhan.
However, Pradhan said that Jharkhand remained a state where most of the small and mid-sized loan under
Rs2 lakh was distributed to the farmers. “These farmers always keep on looking at the government expecting that their loans would be written off. Hence, they are neither showing any interest in paying the loan, nor they are expected from bankers. But traders owing less than Rs.10 lakh are trying their best to use this opportunity. But I would say that this is going to happen. Defaulters are just taking little more time,” said a senior State Bank of India official seeking anonymity.