PNB’s Bold Step: Loan Defaulters May Face Tougher Recovery via ARCs

If you have taken a loan from Punjab National Bank (PNB) and your account has become an NPA (Non-Performing Asset), then this news is very important for you. PNB has taken a big and strict step to speed up the recovery of outstanding loans. The bank is preparing to sell more than 100 NPA accounts worth ₹ 4,000 to ₹ 5,000 crores to asset reconstruction companies (ARCs) this year. This step will help the bank to strengthen its balance sheet. Let us know what impact this decision will have on NPA account holders.

Why are NPA accounts being sold

Ashok Chandra, Managing Director (MD) and CEO of PNB, the country’s second largest public sector bank, said that the bank expects an average recovery of 40-50% by selling these accounts.

What is NPA?

An NPA account is one in which the bank does not receive the loan installments on time, and the chances of getting the money back are lower.

What is ARC?

ARCs are companies that buy NPA accounts from banks and then take the responsibility of recovering the money from the borrowers.

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 improve the recovery of outstanding loans this year and strengthen its financial position.

What will be the impact on NPA account holders

If your account has become NPA and PNB transfers it to ARC, then the situation may change for you. Many times, banks agree to a settlement by giving a discount of 20-30%, but if your account goes to ARC, you may have to face more strictness. If the borrower is unable to reach an agreement with the bank and his account goes to ARC, he may have to pay a higher amount than before to repay the loan. ARC companies recover with more stringent rules.

Suppose you took a loan of ₹1 lakh and your account became NPA. The bank may sell this account to ARC for ₹30-40 thousand. But then ARC will try to recover more than ₹30-40 thousand from you. All those people who have an NPA account in PNB need to be alert due to this decision. It would be better if they contact the bank as soon as possible and resolve their loan, so that their account does not go to ARC.