New Delhi: Five public sector banks (PSBs), including State Bank of India, Punjab National Bank and Bank of Baroda, are working out the details and workflow for a common collection firm to recover retail and MSME loans below Rs 5 crore.
The initiative will be pursued through PSB Alliance Pvt Ltd, which will develop a proof of concept, said people familiar with the development. Other state-run banks will join the project later, they said.
"This will help lenders focus on core banking activities while enhancing recoveries in cases of multiple loans to a single borrower from different banks," said a senior bank executive, adding that once finalised, all banks will take a stake in the firm as in the case of National Asset Reconstruction Company Ltd.
Only three-four PSBs currently outsource their debt collection and it is largely for retail loans, another bank executive said. "This new collection agency can shape up to be a step before banks transfer such accounts to asset reconstruction companies," he said, adding it would help banks keep their focus on recovering large amounts.
The finance ministry has already directed banks to review their top 20 cases regularly and also monitor accounts where resolution plans are pending for consideration with the committee of creditors for more than three months.
"The firm should be fully operational in this fiscal. We are also collaborating with banks on other initiatives," said an official from PSB Alliance, a company set up by public sector banks to provide a common platform for delivering banking services.
Emails sent to banks seeking comment did not elicit any response till press time Monday.
The government, through the banks' reform agenda, Enhanced Access and Service Excellence Reforms, has been nudging PSBs to scale up internal collaboration, create common utilities and improve their performance and competitiveness.
Banks are already collaborating on some other common platforms which include the auction platform Banknet, door-step banking and a cloud infrastructure for PSBs.
According to a Care Ratings report, as of March 31, 2025, the gross non-performing assets of PSBs improved significantly, declining by 17% from a year earlier to ₹2.94 lakh crore. It, however, noted that fresh slippages during Q4 FY25 rose 7.8% Y-o-Y to ₹25,000 crore.
( Originally published on Jun 02, 2025 )
The initiative will be pursued through PSB Alliance Pvt Ltd, which will develop a proof of concept, said people familiar with the development. Other state-run banks will join the project later, they said.
"This will help lenders focus on core banking activities while enhancing recoveries in cases of multiple loans to a single borrower from different banks," said a senior bank executive, adding that once finalised, all banks will take a stake in the firm as in the case of National Asset Reconstruction Company Ltd.
Only three-four PSBs currently outsource their debt collection and it is largely for retail loans, another bank executive said. "This new collection agency can shape up to be a step before banks transfer such accounts to asset reconstruction companies," he said, adding it would help banks keep their focus on recovering large amounts.
The finance ministry has already directed banks to review their top 20 cases regularly and also monitor accounts where resolution plans are pending for consideration with the committee of creditors for more than three months.
"The firm should be fully operational in this fiscal. We are also collaborating with banks on other initiatives," said an official from PSB Alliance, a company set up by public sector banks to provide a common platform for delivering banking services.
Emails sent to banks seeking comment did not elicit any response till press time Monday.
The government, through the banks' reform agenda, Enhanced Access and Service Excellence Reforms, has been nudging PSBs to scale up internal collaboration, create common utilities and improve their performance and competitiveness.
Banks are already collaborating on some other common platforms which include the auction platform Banknet, door-step banking and a cloud infrastructure for PSBs.
According to a Care Ratings report, as of March 31, 2025, the gross non-performing assets of PSBs improved significantly, declining by 17% from a year earlier to ₹2.94 lakh crore. It, however, noted that fresh slippages during Q4 FY25 rose 7.8% Y-o-Y to ₹25,000 crore.
( Originally published on Jun 02, 2025 )
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