Source :Mayur Shetty, TNN | Apr 30, 2011, 05.40am IST
The Corporation Bank has decided to name and shame defaulters publicly to build pressure and make them repay loans. While some banks put out notices and advertisements naming defaulters in newspapers, the Mangalore-based bank has taken it a step ahead by putting up their photographs on hoardings.
"We put up the photographs of willful defaulters in our branches and on hoardings.
"We put up the photographs of willful defaulters in our branches and on hoardings.
We are not doing anything illegal because at the time of disbursement of loan, we obtain the photographs of borrowers and an authorization which allows us to take action if there is a default," said Ramnath Pradeep, chairman, Corporation Bank.
According to Pradeep, publishing the photographs has helped improve loan recoveries. Reduction in bad loans through recovery and upgrade has improved to Rs 627 crore in 2010-11 from Rs 320 crore last year.
According to Pradeep, one woman who had a loan account in Delhi called him up and threatened to commit suicide if her photographs were not removed from a hoarding. "She did not commit suicide, but she did repay her loan," he said.
Bus this recourse is only possible when the borrower is an individual.
According to Pradeep, one woman who had a loan account in Delhi called him up and threatened to commit suicide if her photographs were not removed from a hoarding. "She did not commit suicide, but she did repay her loan," he said.
Bus this recourse is only possible when the borrower is an individual.
The bank publishes the borrower's photographs ostensibly to announce to the general public that the bank is attaching his or her assets and people not to deal with him/her in any way. "We give them enough notice and enough opportunities to start repaying. It is only when we are set to take action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act that we publish photos," said H M A Khan, general manager, Corporation Bank.
In case of companies, since the borrower is a corporate entity it is not possible to publish individual photographs.
In case of companies, since the borrower is a corporate entity it is not possible to publish individual photographs.
However, the bank does send the names to a database of willful defaulters, which is published by the Credit Information Bureau of India.
Identifying willful defaulters is tricky business.
Identifying willful defaulters is tricky business.
Although RBI has come out with some guidelines, it broadly defines someone who is able to repay his loan but chooses not to. In terms of RBI's definition, it also includes those who have raised loans on false pretences or diverted funds.
Many years ago, officials of another south-based lender, Vijaya Bank, took to the streets to demonstrate outside the office of willful defaulters
Many years ago, officials of another south-based lender, Vijaya Bank, took to the streets to demonstrate outside the office of willful defaulters
RBI has since strengthened the hands of lenders by helping to introduce new legislation that allowed them to attach the property of borrowers and sell them.
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