Corporation Bank applying ‘name and shame' tactic to tackle ‘wilful defaulters'

‘Name and shame' appears to be the name of the game for Mangalore-headquartered Corporation Bank to get wilful defaulters to pay up.

Taking a cue from the rogues-gallery that is ubiquitous in all police stations, the public sector bank is displaying photographs and details of wilful defaulters on the notice boards of branches from where they have taken loans. Besides, it is also putting up hoardings outside the branches with photographs and details of wilful defaulters.

Once borrowers realise that their ‘wilful defaulter status' is in the public domain, they scamper to repay the dues owed to the bank for fear of social ostracisation, said Mr Ramnath Pradeep, Chairman & Managing Director, Corporation Bank.

He emphasised that there is nothing illegal about making public the wilful defaulters' name as the bank is only trying to recover depositors' money.

A non-performing borrowal account with outstandings aggregating Rs 25 lakh and above is categorised as a wilful defaulter if the borrower either deliberately does not pay his dues; or siphons off funds to the detriment of the defaulting unit; or does not utilise funds disbursed to purchase assets or the assets are sold and the proceeds mis-utilised.

Further, the banking regulator's definition of wilful defaulter also covers misrepresentation/falsification of records; disposal/removal of securities without the bank's knowledge; and fraudulent transactions by the borrower

Using the ‘name and shame' tactic and by resorting to the traditional recovery mechanisms such as the debt recovery tribunals, loan recovery camps, and one-time settlement, the bank has achieved success in recovering and upgrading assets aggregating Rs 627 crore in FY2011, against Rs 320 crore in FY2010.

In FY2012, the bank wants to aggressively pursue recoveries from written off assets aggregating Rs 800 crore. “Even if we recover 20 per cent of the written-off amount, it will boost our bottomline,” said Mr Pradeep.

Performace

Meanwhile, provision for pension liabilities weighed down the profitability of Corporation Bank in the fourth quarter. The bank reported a 10.6 per cent increase in net profit at Rs 345 crore in the quarter ended March 31, 2011, against Rs 312 crore in the corresponding quarter.

The bank made provisioning of Rs 110 crore towards second option for pension for existing employees and fully provided Rs 74 crore towards pension of retired employees.

In the full financial year, the bank reported a 21 per cent increase in net profit at Rs 1,413 crore (Rs 1,170 crore in FY2010).

In FY2012, Corporation Bank expects deposits to grow by 33 per cent to reach Rs 1,56,000 crore (Rs 1,16,748 crore as of March-end 2011) and advances to grow by 25 per cent to reach Rs 1,09,000 crore (Rs 86,850 crore).

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