Old notes windfall: Canara Bank sees better recovery of MSME loans

Canara Bank expects a windfall in MSME (micro, small and medium enterprises) and SME (small and medium enterprises) recoveries post demonetisation.

“There is a good chance of recoveries during this period in Non-Performing Assets (NPAs) and we are coming out with various one-time settlement (OTS) schemes to mobilise more,” Rakesh Sharma, Managing Director & CEO of the bank, told BusinessLine .

“Post demonetisation, we are talking to borrowers for NPAs settlement. In case they have old notes, they can be deposited in their loan accounts. I feel it will help improve the recovery rate,” he said.

“Initially, collection under demonetisation was slow because of some uncertainty. Now after RBI’s clarification and after it allowed exchange of old notes of ₹500 and ₹1,000, things are improving,” Sharma said.

In SME lending under Mudra Financing, Canara Bank is the frontrunner. The bank's advances to priority sector was 53 per cent as against the minimum requirement of 40 per cent, he said.

Once things stabilise, after second week of December, new demand is expected to come, and then there is a good scope for financing Mudra Loans and new start-up schemes also, he said.

The bank has taken a conscious decision to go aggressive on Mudra Loans, Sharma said.

“I think in Q4, we will see good growth in SME advances. As far as NPAs are concerned, as they mainly deal in cash, they are affected,” Sharma said.

For many units where instalments are due, they are being extended concessions as per RBI norms. “Although it is not restructuring, it will help us in reducing the pressure on NPA advances and once the economy is back on track, by January, everything will likely be normal,” he added.

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