Public Sector Banks Join Hands to Launch Common Loan Recovery Firm for Small Loans

Public Sector Banks are working hard to recover bad Loans. These bad loans negatively impact the balance sheet and performance of banks. Now, Public Sector Banks are planing to create a common firm for recovery of loans.

Five major public sector banks (PSBs) in India, including the State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Baroda, are coming together to create a shared collection agency. This new firm will focus on recovering retail and MSME (Micro, Small, and Medium Enterprises) loans that are below Rs 5 crore.

The goal of this collaboration is to make the process of recovering smaller loans more efficient and streamlined. Instead of each bank managing loan recovery separately, they will join forces under one agency. This will help reduce costs and improve recovery rates for loans given to individuals and small businesses.

The project is being handled through PSB Alliance Pvt Ltd, a company formed by these banks to work on joint initiatives. According to sources familiar with the plan, PSB Alliance will first create a “proof of concept.” This means they will develop a working model or pilot to test how this shared collection firm will operate and how it can best handle loan recovery.

Once the initial phase is successful, more public sector banks are expected to join the effort and become part of this unified loan recovery system. This collaborative approach aims to help banks better manage their loan portfolios, especially for smaller loans, which can be challenging to recover individually.