Banks issuing loans to professionals and students pursuing professional courses have taken a hit due to lay offs and declining placements. These 'professionals' have emerged as prime defaulters owing to the slowdown in the last six months.
In fact, banks were already facing liquidity concerns in the last two quarters. The banks have now constituted special recovery teams to initiate legal actions against the defaulters.
According to a State Bank of India official, around 800 debtors have been declared defaulters in last six months, jeopardising over Rs 37 crore (Rs 370 million) doled out by the bank in Kanpur. "We have issued legal notices to the debtors who have defaulted on more than three consecutive installments," says D K Aggrawal, SBI recovery cell chief manager.
Allahabad Bank executive director S K Dua agrees that the slowdown has impacted the debt recovery adversely. A major chunk of defaulters comprises educational loans.
According to sources, around Rs 2.5 crore (Rs 25 million) of debt is lying non-paid, of which 1,648 defaulters are educational debtors.
The debtor can approach first the joint registrar of the bank and then the high court if he/she did not agree with the recover order, adding that procedures of the cell were quasi judicial in nature.
The debtors, on the other hand, rue about the absence of effective debt relief measures by the government, on the lines of industrial relief packages. "There is an urgent need for a financial package for the students who are not unable to repay educational loans due to the slowing job market," says Akhil Bhartiya Vidyarathi Parishad national secretary, Suresh Bhatt.
Dua says the banks are not in a position to waive the crores of rupees lying unpaid by these professionals. "If the debtor is not in a position to repay, the guarantor or the family kin should make the payment," he asserts.
SBI officials believe that most defaulters are deliberately delaying the payments, on pretext of recession. "A number of the debtors are working abroad after taking the loans and are clearly in a position to repay the debts," says Dua.