Bank union opposes public sector banks’ ‘loan melas’ on bad loan pile-up fears

The Maharashtra State Bank Employees Federation (MSBEF) spoke out against ‘loan melas’ organised by state-owned banks on Monday, claiming that credit granted without due diligence at such events leads to a buildup of non-performing assets.

Such ‘melas’ add to the retail Non-Performing Assets (NPAs) for the lenders as the loans are granted without much diligence, MSBEF said in a statement.

The announcement comes on the same day that Union Minister of State for Finance Bhagwat Karad is attending a similar mela in Aurangabad, Maharashtra, where public sector lenders hope to distribute Rs 2,900 crore in loans.

According to the MSBEF, no political party assists in the loan recovery process because past experience indicates that borrowers stop repayments for such loans.

…The same political parties demand for waiver of those loans so as to appease voters” during elections, it said, adding that such events vitiate the recovery atmosphere.

According to the report, NPAs cause public sector banks to fail and are then used to push for lender privatisation.

According to the union, such lenders must be given “genuine autonomy.”

“Government, being owner of public sector banks, should give the direction to public sector banks. Government should address policy issues such as effective legal structure for recovering overdues, timely appointment of board of directors etc,” it said.

It should also ensure that banks hire an adequate number of employees, charge minimal service fees to customers, and provide adequate and timely credit to small and medium-sized farmers and businesses.

Source: Economic Times

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