The Telegraph
Since 1st March, 1999
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State-run banks tap staff for personal loans

Calcutta, Oct. 20: Faced with declining demand in corporate credit and a highly competitive retail arena, the public sector banks are now turning to their staff with personal loans.

A senior official of State Bank of India said, “Turn your employees into customers before your competitors do so. That is the tenet some bankers seem to be working on as they cash in on the idea of extending clean overdraft facility to staff members.”

The concept appears to be an extension of retail banking mantra that banks have been uttering in the last two years.

“There is hardly any big corporate credit offtake. In the retail area too, there is fierce competition. In this situation the banks have no other alternative but to tap their own resources –in this case their own employees,” said a senior official of Bank of India.

Bank of India which has a staff strength of nearly 43,000 had been the first to tap its employees for personal loans. Union Bank of India and State Bank of India had been quick enough to follow suit.

Although the amount made available to each staff member might not be huge, cumulatively it would mark a significant increase in the personal segment advances of different banks. “State Bank of India has two lakh employees. And if the bank can approach 50 per cent of this huge staff strength then it means big business for the bank,” the bankers said.

What makes this lending attractive is the fact that advances to staff are considered safe and require almost none of the hassles that one associates with other borrowers such as follow-up or inspection of books, renewal, verification of assets and others. Above all recovery is said to be 100 per cent as the dues are deducted before disbursement of salary to staff.

A senior official of Allahabad Bank said, “Retail credit is gradually becoming the mainstay of the banks. There is hardly any big project that is coming up and the banks do not have big credit proposals with them. Moreover, with the NPA rules becoming more stringent the banks are becoming more cautious while giving credit.”

The employees, however, are not upbeat about the matter. “We do not think that the banks are doing us any big favour by extending such loans.” Apparently some of them seemed peeved that they have not been extended loans at sub-PLR rates—which some corporate borrowers are able to secure.

But despite the flak, the responses to the offer of this facility is said to be overwhelming.

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