PSU Banks to Launch Joint Debt Collection Platform for Retail and MSME Loans
Five public sector banks including State Bank of India, Punjab National Bank and Bank of Baroda are jointly working on a common platform to recover retail and MSME loans below Rs 5 crore. The platform will be developed under the guidance of PSB Alliance Pvt Ltd, a company set up by state-owned banks to enable shared infrastructure and services.
According to sources familiar with the matter, the participating banks are in the process of creating a proof of concept. Once operational, the recovery firm will function as a shared debt collection agency. Other public sector banks are expected to join the initiative in phases.
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A senior banker involved in the project said that the common recovery agency will allow banks to concentrate on core banking operations while improving coordination in loan recovery efforts. In cases where a borrower has taken loans from multiple banks, this model will streamline communication and action, reducing duplication.
Currently, only a few public sector banks outsource debt collection, and that too primarily for retail accounts. The new agency is expected to act as an intermediate step before distressed accounts are handed over to asset reconstruction companies. Another banker pointed out that the platform would allow banks to focus their internal efforts on large-ticket recoveries while ensuring smaller loans are not neglected.
Officials at PSB Alliance confirmed that the project is targeted for launch within the current financial year. Apart from this initiative, the alliance is also working with banks on other technology-driven collaborations to enhance operational efficiency.
The finance ministry has directed public sector banks to actively review their top 20 delinquent accounts and closely monitor those with unresolved resolution plans for more than three months. This is part of the larger effort to improve governance and expedite the resolution of stressed assets.
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The new platform fits into the government’s larger banking reform strategy under the Enhanced Access and Service Excellence agenda, which encourages PSBs to build shared infrastructure and improve competitiveness through collaboration.
State-run banks have already partnered on common services such as Banknet for auctions, doorstep banking, and cloud-based digital infrastructure for internal operations.
According to a Care Ratings report, gross non-performing assets of public sector banks fell to Rs 2.94 lakh crore as of March 31, 2025, marking a 17 percent decline from the previous year. However, fresh slippages during the fourth quarter of FY25 rose by 7.8 percent year-on-year to Rs 25,000 crore, highlighting ongoing challenges in asset quality.
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Emails sent to the participating banks seeking official comment on the joint collection platform did not receive a response by the time of publication.
Disclaimer: This post is for general informational purposes only. It does not constitute financial advice. Please consult a qualified professional before making financial decisions.
