Calcutta, June 18: Panchayats in Bengal have gone from being basic units of local self-government to being white knights for United Bank of India (UBI) in a plan that puts them at the heart of a loan-recovery sweep.
The bank, which recently turned around and shook off its weak-bank stigma, will pay the panchayats 5 per cent of the assets dug out. “This money will go straight to the panchayat’s coffers,” said a senior official of UBI.
Explaining the rationale behind appointing panchayats as recovery agents, the officials said that it was not always possible for bank employees to go to far-flung areas and convince people to pay up. “What a panchayat pradhan says will sound more convincing to them,” they said.
The bank is also in talks with the panchayats in Assam for a similar recovery scheme in that state.
The bank hopes to recover loans below Rs 1 lakh that have turned sticky through this scheme. The bank’s book shows that about Rs 200 crore has turned sticky on this account (loans below Rs 1 lakh).
The bank has also worked out certain incentives for defaulters who pay up. “We have worked out a scheme for them. If they pay up at least 50 per cent of their dues then we will renew their accounts and give them loans,” officials added.
According to the bank officials, most of these borrowers are not wilful defaulters. Debt burden is a social stigma for them. They want rinmukti (get rid of debts). So the panchayats are trying to convince them to pay up. The issues are discussed at Gram Sansads (meetings at the ward or sub-panchayat level) and Gram Sabhas (mass assemblies of the entire panchayat) and the panchayats arrive at a settlement.
The bank has received a good response from the Nadia district. “We have started in a small way. But we will step up our efforts this fiscal. We feel that the scheme will yield good results,” the bank management said.
The Bengal government is also happy with the steps UBI is taking to recover the non-performing assets (NPAs).
Senior officials of the state finance ministry said: “The state spends almost half of its annual budget for the panchayats. The money goes towards creating rural employment and for local development. If the panchayats earn something through UBI’s scheme it will not only help them to undertake developmental works but will also help the state government which is currently passing through a severe financial crisis.
UBI is saddled with net non-performing assets (NPA) of Rs 406 crore and gross NPAs of Rs 959 crore as on March 31, 2003. The bank, which has a capital adequacy ratio of 15.17 per cent, hopes to reduce NPAs by Rs 225 crore in the current fiscal.