It is expected that another Rs 50,000 crore will come up for auctions by the ARCs by the end of this month
Banks have put on sale Rs 26,883.23 crore of bad debt with the Asset Reconstruction Companies (ARCs) during January-February period as non-performing assets (NPAs) continue to plague the balance sheets of several lenders. It is expected that another Rs 50,000 crore will come up for auctions by the ARCs by the end of this month. However, this does not include the bilateral deals that banks are undertaking, especially in cases where a bank is a sole lender.
"Majority of the accounts are put on sale on 100% cash basis which means the ARCs have to pay the entire amount upfront, a departure from the earlier practice of converting part of the payments to security receipts," said a bank officer.
State Bank of India (SBI) has just put Rs 4,749.87 crore from 488 smaller accounts on sale. Earlier the bank had also put Rs 15,431 crore of the Essar Steel account on sale but withdrew on hopes of a resolution through NCLT.
"It is generally in the fourth quarter that the majority of the assets will be on the block as the banks want to show stronger balance sheets with lower NPAs," said a banker.
Most of the banks have put their corporate accounts on sale. Bank of India (BOI) has put a total of Rs 4,205.84 crore on sale. Some of the corporate accounts that the bank has put on the block was Rs 1,838.16 crore loan to Reliance Communications, Rs 266 crore the company lent to GVK Power Goindwal Sahib and Rs 262 crore to Asian Colour Coated Ispat. United Bank of India has sold bad loans of Rs 2,297 crore. The top corporate accounts that United Bank sold are Gammon India Ltd- Rs 386.45 crore and Rohit Ferro Tech's Rs 465.78 crore loan.
Andhra Bank also sold off Rs 3,240 crore worth of bad loans, which included its Rs 519.60 crore loans to Transstroy Limited and Rs 399.55 crore of loans to KS Oil Ltd.
The Financial stability report of Reserve Bank of India (RBI) released in January 2019 showed an improvement in gross NPAs of the scheduled commercial banks (SCB) which declined 10.8% at the end of September 2018. But an analysis by RBI shows stress is rising in mining, food processing and construction sectors.
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"It is generally in the fourth quarter that the majority of the assets will be on the block as the banks want to show stronger balance sheets with lower NPAs," said a banker.
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