The Hindu Business Line : PNB to focus on ‘NPA administration’

Dr K.C. Chakrabarty, who took over as Chairman and Managing Director of the bank in June, has given top priority to this programme, which he described as “ NPA administration.”

Currently, over 3.81 per cent of the bank’s advances are bad loans or NPAs. Dr Chakrabarty’s aim is to bring it down to below two per cent at the earliest. For the quarter ended June 30, the bank had reported fresh NPAs of Rs 600 crore. This is over and above the Rs 2,000-crore slippage the bank had in the last fiscal. PNB had made Rs 137.87-crore provisions for non-performing assets in the first quarter.

Dr Chakarabarty told Business Line “lots of NPAs were added last year. We have expanded fast but without adequate capacity. From a 15 per cent credit growth suddenly if you grow at 30 per cent, you have to examine the system& #8221;.

Under the NPA administration, to begin with, the risk management system would be strengthened at all levels —from doing due diligence on the borrower, monitoring loans accounts and upgrading weak accounts. Similarly, the recovery mechanism would be implemented effectively.

As part of risk management, the bank would adopt the ‘hub and spoke model’ for selection, approval, and disbursal of retail loans. Improving the scoring system and rating model in order to reduce the rate of adverse selection is also another step in this direction.

The bank is also considering appointing recovery agents for the loans that have become NPAs, the Chairman said.

“NPAs need constant monitoring. The system exists, but it was not followed strictly. It needs to be strengthened at every level,” Dr Chakrabarty said.

Explaining reasons for the high amount of NPAs, a senior official from the bank said that a large quantum of PNB’s loans were in the agriculture sector, as 67 per cent of the bank’s branches are in rural and semi-urban areas. Due to continuous drought, several of these loans had become bad accounts.

Another reason was the increase in interest rates in the banking industry over the last few years, which in turn led to an increase in monthly repayments.

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