Back

TREND: Rush by banks to sell 715 bln rupees of NPAs before FY19 ends

Friday, Mar 15, 2019

 

By Manish Suvarna and Vishal Sangani

 

MUMBAI – Nearly 715 bln rupees of bad loans have been put on the block by 16 state-owned banks and IDBI Bank, as they look to clean up their balance sheets before the current financial year ends on Mar 31.

 

The move is aimed at freeing up capital for lending in 2019-20 (Apr-Mar).

 

State Bank of India, Oriental Bank of Commerce, Dena Bank, Bank of Baroda, Andhra Bank, United Bank of India, among others, have offered to sell around 45,000 non-performing loan accounts to asset reconstruction companies, banks, non-banking finance companies and financial institutions.

 

In the Oct-Dec quarter, 11 state-owned lenders had put up 592 loan accounts with an outstanding of 440.13 bln rupees for sale, according to data complied by Cogencis.

 

Banks have been plagued by bad loans ever since Oct-Dec 2015, when Reserve Bank of India first conducted a system-wide Asset Quality Review. This led to 11 state-owned banks and one private sector bank being placed under prompt corrective action framework due to reporting losses, rise in bad loan ratios, and erosion of capital.

 

Even the time-bound resolution framework of the Insolvency & Bankruptcy Code has seen delays, which has led banks to look to offload even assets close to resolution, as they are still not certain on recovery timeline.

 

"Time value of money" was the reason cited by State Bank of India Chairman Rajnish Kumar when asked why the Essar Steel loan of 154 bln rupees was offered for sale, even as resolution looked to be around the corner. But, weak demand for the large value asset and subsequent favourable ruling for ArcelorMittal taking over the company, has led SBI to abandon the plan to sell this loan.

 

The attempt to sell Essar Steel loan made SBI the biggest seller in the bad loan sale space this quarter, with 1,187 accounts with an outstanding of 303.1 bln rupees offered for auction. This meant that SBI offered 42.4% of the 715 bln rupees that were placed for sale by all banks.

 

Bank of Baroda followed with loans to the tune of 95.56 bln rupees being on the block while Andhra Bank offered to sell loans accounts worth 76.34 bln rupees.

 

Reliance Communications, Alok Industries, Bhushan Power and Steel, Jayaswal Neco Industries and Jai Balaji Industries were the other cases with the National Company and Law Tribunal that banks looked to sell. These companies were part of the two lists of the central bank where banks were asked to file insolvency cases.

 

Bank of Maharashtra offered a whole portfolio of education and micro, small and medium enterprises loans for sale, which covered a large number of accounts at 42,790, although the total quantum was comparatively lower at 4.75 bln rupees.

 

Data compiled by Cogencis shows that banks were more aggressive in selling the bad loans in the Jan-Feb period than in March, as the lenders traditionally look to close out sales early in March itself. The March tenders run the risk of the deals spilling over into April, defeating the purpose of looking to clean up the March-end financials.

 

State-owned banks have to find internal sources for capital to begin fresh lending, as the government has not budgeted any capital infusion in 2019-20. Apart from sale of non-core assets or raising capital from the market, finding buyers for bad loans is an option that will help them begin the next financial year with a clean slate.

 

Following are the list of accounts and loans that has been offered for sale by banks in Jan-Mar:

 

Banks JanuaryFebruaryMarch
Amount in bln rupeesNumber of accountsAmount in bln rupeesNumber of accountsAmount in bln rupeesNumber of accounts
Allahabad Bank  5.8141  
Andhra bank  32.417143.9372
Bank of Baroda33.121559.28493.1614
Bank of India    2.061
Bank of Maharashtra  3.394.7542790
Central Bank of India3.542  33.695
Dena Bank27.8414812.584770.591
Indian Bank  7.6355  
Indian Overseas Bank  2.513  
IDBI Bank     13.526
Oriental Bank of Commerce6.36148.163192.862
Punjab National Bank  11.831121
State Bank of India190.520360.0877152.48213
Union Bank of India  20.2124  
United Bank of India  25.95744.0560
Punjab and Sindh Bank    1.151
Vijaya Bank    0.891
Total261.36382249.7071187203.0943165

 

End

 

Edited by Ashish Shirke

 

Cogencis Tel +91 (22) 6619-0000
Send comments to feedback@cogencis.com

This copy was first published on the Cogencis WorkStation

© Cogencis Information Services Ltd. 2019. All rights reserved.

Other News

TREND: Lenders’ optimism drives Indian equity binge of FPIs

Friday, Nov 27, 2020 By Chiranjivi Chakraborty MUMBAI – The domestic equity market has attracted 705 bln rupees in net foreign inflows since Oct 1, likely to be the largest ever flows in a two-month period, and it has outperformed peers across the emerging markets basket. While a confluence of external factors have seen money pour into equities of […]

Govt source says FY21 tax shortfall seen around 2.6 trln rupees

Friday, Nov 27, 2020 –Govt source: See FY21 tax mop-up marginally lower than FY20 revised aim –May cut FY21 tax aim sharply after Dec advance tax  By Adrija Chatterjee and Shubham Batra NEW DELHI – The Indian economy may be showing signs of recovery, but tax collections in the current financial year ending March are likely to fall short […]

TREND: FIIs enter Dec F&O series with high hopes, but DIIs cautious

Friday, Nov 27, 2020 By Chiranjivi Chakraborty MUMBAI – After a record-breaking buying spree in the November derivative series, foreign institutional investors have started the new futures and options series with bullishness at a multi-year high.  The optimism comes in the backdrop of increasing probability of the mass distribution of COVID-19 vaccines in major countries from the March […]