Ugly side of loan melas: Here is why this bank union is opposing public sector banks credit fests

The Maharashtra State Bank Employees Federation (MSBEF) on Monday opposed 'loan melas' organised by state-owned banks, saying that credit granted without much diligence at such events lead to pile-up of non-performing assets.

Such 'melas' add to the retail Non-Performing Assets (NPAs) for the lenders as the loans are granted without much diligence, MSBEF said in a statement.

The statement comes on a day when Union minister of state for finance Bhagwat Karad is attending one such mela in Maharashtra's Aurangabad, where public sector lenders are targeting to distribute Rs 2,900 crore of loans.

Stating that past experience suggests borrowers stop repayments for such loans, the MSBEF said, no political party helps in the loan recovery process.

"The same political parties demand for waiver of those loans so as to appease voters" during elections, it said, adding that such events vitiate the recovery atmosphere.

Public sector banks are put into crisis through NPAs, and the same is used for pushing privatisation of the lenders, it said.

The union said there is a need for "genuine autonomy" to be given to such lenders.

"Government, being owner of public sector banks, should give the direction to public sector banks. Government should address policy issues such as effective legal structure for recovering overdues, timely appointment of board of directors etc," it said.

It should also ensure recruitment of adequate number of staff in banks, minimal service charges for customers and adequate and timely credit is given to small and medium farmers as well as industries.