PNB, Corp Bank most aggressive in going after big debtors; SBI, BoB more relaxed

Punjab National Bank, the third largest public sector bank in India, and smaller cousin Corporation Bank can teach bigger siblings like State Bank of India and Bank of Baroda a thing or two about going after big loan defaulters, an analysis of Reserve Bank of India data shows.

In the last four years, these two banks have been especially aggressive in going in after big loan defaults — defined as those who owe Rs 10 cr or more — compared to players like State Bank of India and Bank of Baroda — the top two public-owned lenders in India.


Public-owned banks in India are under a cloud due to allegations that officials in these banks were too lax in lending money to big corporations and others, which has resulted in losses amounting to lakhs of crores of rupees to the tax payer.

According to Care Ratings, the total bad loans created by public owned sector banks amounted to Rs 6.14 lakh cr as of the end of 2016. Out of this, over Rs 1 lakh cr of bad loans has been created just by State Bank of India.

Dividing the Rs 6.14 lakh cr by the estimated total number of adults in India gives a share of Rs 10,230 per head — the amount of money that each citizen has to pay to repair the bad debt problem. The actual burden may be lower as the banks will recover some money from these defaulters by seizing and selling some of their assets.


Going by the RBI data, at least some banks are well on their way to doing that.

Between the 27 public-owned banks, a total of Rs 43,300 cr worth of assets have been seized in the three years till March 2016 from people who owed Rs 10 cr or more.

In addition to this amount, another Rs 22,003 cr worth of assets have been seized in the period from April to December 2016 — taking the total to Rs 65,303 cr.

If this trend continues, the total amount seized in the ongoing financial year will be around Rs 29,264 and the total amounts seized in the last four years from such debtors will amount to Rs 72,563 — about 11.8% of the total bad debts on the books of public sector banks as of December.


However, when it comes to repossessions and seizures of property from big debtors who owe Rs 10 cr or more, all banks are not equally aggressive.

Some are going at it with gusto, while others are still playing nice.

The most aggressive of government banks is Punjab National Bank, which has repossessed assets worth Rs 17,995 cr in the last 3 years and 9 months from big defaulters. This amounts to almost one-third (32.7%) of the banks total bad debt of Rs 55,000 cr as of June 30 last year.

The second most aggressive player is Corporation Bank. Corp Bank has seized assets worth Rs 4,782 cr — which is 30.4% of its total bad loans at the end of June.

Among the worst performers in this regard is Bank of Baroda, which is considered India’s second largest public sector bank after SBI.

BoB seized assets worth just Rs 1,600 cr in the nearly four-year period. The amount forms just 4.5% of its bad loan burden of Rs 35,604 cr.

The country’s biggest lender, State Bank of India, also has a dismal track record of going after the big defaulters, going by the numbers.

The bank seized assets worth Rs 12,148 cr from big debtors in the 3 years and 9 months, and this amounts to only 13% of its total bad debt burden of Rs 93,137 cr as of June. It should be noted that the bad debt on SBI’s books has since increased to 1.08 lakh cr.

The track record of other banks fall somewhere in between (see chart.)