Chocolates for defaulters
State Bank of India (SBI), India's largest lender, has now come up with an innovative way to ensure timely repayment of loans- a surprise visit with a pack of chocolates. This novel way is intended to encourage borrowers, especially retail borrowers, to make timely repayments.
According to the State Bank of India, it has been found that a borrower who is planning to default will not answer a reminder call from the bank. So the best way is to meet them at their homes unannounced.
The move comes amid surging retail lending in the system coupled with increasing delinquency levels on the back of the upward movement in the interest rates.
SBI's retail loan book grew over 16.46 per cent to ₹12,04,279 crore in the June 2023 quarter from ₹10,34,111 crore in the year-ago period, making it the largest asset class for the lender whose total book stood at ₹33,03,731 crore, growing at 13.9 per cent on-year.
In fact for the entire system, the double-digit loan growth of around 16 per cent has been led by retail loans only.
"With two fintechs which use artificial intelligence, we are piloting a novel way of reminding our retail borrowers of their repayment obligations. While one is doing conciliation with borrowers, the other is alerting us on the propensity of a borrower to default. And to such borrowers who are likely to default, the representatives from this fintech will visit them, carrying a pack of chocolates for each of them, and remind them of the forthcoming EMIs," Ashwini Kumar Tewari, managing director in-charge of risk, compliance and stressed assets at SBI, said here over the weekend.
According to Tewari, this novel method of carrying a pack of chocolates and personally visiting them is adopted because it has been found that a borrower who is planning to default will not answer a reminder call from the bank. So the best way is to meet them at their own homes unannounced and surprise them. And so far, the success rate has been overwhelming, he said.
Tewari refused to name the fintechs saying the move is just at the pilot stage and has been put into place just about 15 days back and "if successful, we will formally announce it".
We are also talking to a few other fintechs to improve our collection efficiencies and hopefully by the end of the year, we will have formally tied up with at least half of them," he said, adding, "we want to continue the pilot for at least four to five months.
SBI's over ₹12 lakh crore of retail book consists of personal, auto, home and education loans. With a home loan book of over ₹6.3 lakh crore as of June, SBI is the largest mortgage lender too.
Source: Live Mint
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Banks have been advised against harsh steps in loan repayment cases
New Delhi: Union finance minister Nirmala Sitharaman on Monday said that the government has advised banks across the public and private sectors not to resort to harsh actions in cases of loan repayment.
Speaking in the Lok Sabha during the question hour, Sitharaman said that banks have been told to deal with such cases with sensitivity and through a humane approach.
''I have heard complaints about how mercilessly loan repayments have been followed up by some banks. The government has instructed all banks, both public and private, that harsh steps should not be taken when it comes to the process of loan repayment and they should approach the matter with humanity and sensitivity in mind,'' Sitharaman said.
She further said that the government has given the directive through the Reserve Bank of India.
In another instance, responding to a question on some banks charging ‘exorbitant' interest rates, The minister of state for finance Bhagwat Kishanrao Karad said that the government does not interfere on the matters of interest rates on loans provided by banks.
Karad added that the board of a bank or its officials takes decisions on interest rates and not the government, adding that the Centre has rolled out a number of schemes to help common people get cheaper loans.
Source: Live Mint
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