B L :KRSrivats February 10: 2014
The Oriental Bank of Commerce (OBC) is likely to sell bad loans worth Rs. 800-1,000 crore to asset reconstruction firms this quarter, SL Bansal, Chairman and Managing Director, has said.
The public sector bank had last resorted to sale of assets to asset reconstruction companies (ARCs) about four years ago.
In recent years, banks have been reluctant to sell their bad loans to ARCs, which seek to acquire them at a discount and recover the money from defaulters.
But the public sector lenders’ stance had changed recently with rising bad debts in the banking system prompting them to shed non-performing assets to ARCs.
To reduce the stress on asset quality, many banks, including Bank of India, Allahabad Bank, United Bank and UCO Bank, have resorted to sale of bad debts to ARCs.
The biggest beneficiary of banks’ move to sell bad debts in the current fiscal could be the Asset Reconstruction Company of India Ltd (Arcil), which is India’s first ARC and a dominant player in the distressed assets market.
As against acquisition of bad loans worth Rs. 740 crore in 2012-13, Arcil is looking to acquire assets worthRs. 2,000 crore this financial year.
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