UCO Bank Scraps Sweet Plan. State-run UCO Bank, a day after announcing its intention to distribute sweets to its top 10 non-performing borrowers, has retracted the circular. The decision was made after receiving feedback from bank employees, who found it challenging to implement uniformly. According to a senior bank executive, each case should be assessed on its merits, and strict action, in line with existing rules, should be taken for uncooperative non-performing borrowers.
UCO Bank’s decision to retract its plan of distributing sweets to non-performing borrowers has raised questions about the complexities of banking and debt recovery. This article explores the reasons behind the bank’s change of heart and its implications.
- Bank Responds to Employee Feedback: UCO Bank Scraps Sweet Plan
- Government’s Sensitivity Directive
- Alternative Approach by State Bank of India
- Regulatory Guidelines: UCO Bank Scraps Sweet Plan
- Improved Performance of Public Sector Banks
- UCO Bank Reverses Sweet Distribution Plan
- Challenges in NPA Recovery: UCO Bank Scraps Sweet Plan
- Emphasizing Customer Connection
- Strict Compliance with the Directive
- Upcoming Financial Results: UCO Bank Scraps Sweet Plan
- Conclusion:
- Disclaimer
Bank Responds to Employee Feedback: UCO Bank Scraps Sweet Plan
The circular was withdrawn late on a Thursday evening due to concerns raised by the bank’s employees. Some non-performing borrowers were uncooperative, making it difficult to carry out the plan. The bank acknowledged that not all non-performing borrowers were willful defaulters. And some faced genuine challenges that led to their accounts becoming non-performing.
Government’s Sensitivity Directive
Earlier this year, Finance Minister Nirmala Sitharaman had instructed public and private sector banks to handle loan recovery cases with sensitivity and avoid harsh measures. The Reserve Bank of India had also proposed new norms to restrict regulated entities and their recovery agents from contacting borrowers or guarantors before 8 a.m. or after 7 p.m. for loan recovery.
Alternative Approach by State Bank of India
The State Bank of India, the country’s largest bank, adopted an alternative approach by partnering with fintech companies that use artificial intelligence. These fintechs visit borrowers who are likely to default and provide reminders with chocolates about upcoming installments.
Regulatory Guidelines: UCO Bank Scraps Sweet Plan
The Reserve Bank of India’s draft norms on Managing Risks and Code of Conduct in Outsourcing Financial Services explicitly state that regulated entities and their recovery agents should refrain from intimidation or harassment in debt collection efforts, whether verbal or physical.
Improved Performance of Public Sector Banks
In the fiscal year 2022-23, public sector banks (PSBs) achieved a record net profit of approximately Rs 1.05 lakh crore, nearly triple the net profit of the fiscal year 2013-14. Their asset quality also improved significantly, with gross non-performing assets (NPAs) at 4.97% and net NPAs at 1.24% in March 2023.
UCO Bank Reverses Sweet Distribution Plan
The public sector lender UCO Bank has reversed its decision to distribute sweets to its top 10 Non-Performing Assets (NPA) borrowers for Diwali this year. The bank issued a statement on November 2, announcing the withdrawal of the plan.
Challenges in NPA Recovery: UCO Bank Scraps Sweet Plan
The bank recognized that recovering dues from non-performing borrowers is not a straightforward task. It acknowledged that not all non-performing borrowers are willful defaulters; some face business failures, loss, or other unavoidable circumstances. In some cases, conflicts between customers and bank officials contribute to accounts becoming non-performing.
Emphasizing Customer Connection
The bank stressed the importance of maintaining a connection with non-performing borrowers to bridge the gap and create empathy and harmony. This approach might encourage some borrowers to come forward and settle their accounts with the bank.
Strict Compliance with the Directive
The bank advised all Zonal heads to ensure strict compliance with the directive and acknowledged that NPA borrowers were once valued customers of the bank.
Upcoming Financial Results: UCO Bank Scraps Sweet Plan
UCO Bank sets to release its Q2FY24 financial results on November 3, 2023. The bank’s performance in the June quarter of the current fiscal year, 2023-2024, showed an 81% surge in net profit, reaching ₹223.48 crore, a significant improvement from ₹123.61 crore in the previous year. The bank also saw a decrease in gross non-performing assets (GNPAs) and net non-performing assets (NPAs), indicating a positive trend in its financial health.
Conclusion:
UCO Bank’s move aligns with the government’s sensitivity directive for debt recovery. It highlights the evolving landscape in Indian banking, emphasizing the importance of ethical debt collection practices and improved customer relations. The industry’s adaptability and commitment to change will shape its future.
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