Source:BS:Abhijit Lele / Mumbai March 17, 2010, 0:41 IST
With the financial year coming to a close,
commercial banks have hastened work on
sprucing the health of balance sheets.Many banks have floated one-time settlement (OTS)
schemes for small and medium enterprises and tring to
sell non-performing assets (NPAs).
State Bank of India, Corporation Bank, Karnataka Bank
and Karur Vysya Bank have already floated an OTS each.
Many others are in the process of doing so.| TURNING BAD | ||
| Rs Crore | Gross Non Performing Assets | Net Non Performing Assets |
| Dec ‘08 | 55280.37 | 24550.19 |
| Mar ‘09 | 59368.59 | 27107.51 |
| Jun ‘09 | 61626.83 | 28065.95 |
| Sep ‘09 | 65537.51 | 29337.79 |
| Dec ‘09 | 70781.35 | 33166.27 |
| Common Sample for 39 Listed bank (standalone results) Source Capitaline | ||
Bankers said while such efforts (OTS and NPA sale) are
regular activity, the financial crisis and the recent regulatory
fiat for increasing the provision coverage ratio are also driving them.
The global financial crisis put a strain on corporate, small enterprises
and retail borrowers, leading to substantial addition to gross NPAs.
Plus, the Reserve Bank of India mandated banks to attain a 70 per
cent loan loss coverage ratio by September 2010.
SBI chairman O P Bhatt said the bank would offer a settlement for
bad loans to provide relief to small firms hit by the financial crisis.
"We have got a large number of units which are stressed...
We are trying to incentivise them with a one-time settlement," Bhatt said.
Karnataka Bank chief executive Jayarama Bhat said his bank
did not intent to sell NPAs, but had floated a one-time settlement
scheme from which it expects to recover substantial amounts.
This would also help to reduce outstanding NPAs.
Its gross NPAs rose to Rs 612.3 crore (4.5 per cent) in
December 2009 from Rs 451.2 crore (3.7 per cent) a year earlier.
Chennai-based Indian Overseas Bank has commenced
sale of NPAs for Rs 954 crore, involving 61 accounts.
Its gross NPAs rose in the 12 months ended December 2009
to Rs 3,218.3 crore as against Rs 1,718.1 crore in December 2008.
IOB executive director Y L Madan said the due diligence by
prospective buyers is through and bank hopes to strike a deal
soon. It would help to manage provision coverage.
Similarly, Federal Bank is in the market for sale of assets of
about Rs 80 crore. Its chairman M Venugopalan said, thebank
was trying to sell some NPAs, “but is not in a hurry.
It wants to get better value for assets put on the block”.
The outstanding gross NPAs of the Kerala-based private
bank stood at Rs 790.7 crore at the end of December 2009,
up from Rs 625.7 crore a year earlier.
A Mumbai-based asset reconstruction company said many
banks were in the market for a sale of NPAs, but there
was a gap between what value banks expect and the price
ARCs are ready to offer. Banks prefer cash deals, since the
payments are immediate, which add to the revenues for the year,
as against securities which could take time to realise gains, based
on resolution of NPAs.
An SBI official said his bank would not
resort to large-scale sale of bad loans.Instead, it would do continuous follow-up
with borrowers to ensure better recovery
than the income that could be earned by
offloading bad loans to other parties.
SBI, the country’s largest lender, saw a significant rise in
its gross NPAs to Rs 18,861 crore at the end of
December 2009 from Rs 12,723 crore a year earlier.
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