If you have taken a loan from Punjab National Bank (PNB) and your account has become a non-performing asset (NPA), then this news is very important for you. PNB has taken a big decision to sell more than 100 NPA accounts worth ₹4,000 to ₹5,000 crores to asset reconstruction companies (ARCs) this financial year. This step will strengthen the bank’s balance sheet and speed up the recovery process. But it will directly affect those people whose loan accounts have become NPA.
What is PNB’s new strategy
PNB, which is the second-largest public sector bank in the country, wants to speed up its loan recovery. According to the bank’s Managing Director and CEO, Ashok Chandra, the bank is expecting an average recovery of up to 40-50% by selling these accounts. In some cases, there may be full recovery, while in some weak accounts, this recovery may be slightly less.
What is NPA
NPA refers to those accounts from which the bank does not get the loan installments on time, and the chances of getting the money back are less. ARCs buy these accounts from the bank, and then it becomes their responsibility to recover the money from the borrower.
As soon as an NPA account is sold to an ARC, the bank’s responsibility ends, and the borrower has to deal directly with the ARC. With this step, PNB aims to significantly improve the recovery of outstanding loans in the current financial year and strengthen its balance sheet.
What will be the impact on NPA accounts?
When an NPA account is sold to an ARC, the bank’s responsibility for recovery ends. After this, the borrower has to deal directly with the ARC. Many times, banks agree to 20-30% of the amount in settlement. But if the borrower is unable to repay this amount and his account is transferred to ARC, then he may have to settle the loan by paying a higher amount. This decision of PNB is an important step to improve the recovery of outstanding loans in the current financial year and strengthen the financial position of the bank.