Rs 20,000 crore bank loans on platter for ARCs

Banks have enhanced their efforts for debt recovery from companies, setting aside about Rs 20,000 crore worth of loans to sell to asset reconstruction companies (ARCs) in the fourth quarter.

Recoveries for industrial units and bigger companies are however moving at a snail's pace while smaller commercial and residential premises and land plots are getting sold. This is likely to force banks to write off many loans in the fourth quarter and clean up their balance-sheets.

The recovery teams of banks and their officers are all focused on either selling off their assets or recovering the money from the defaulters.

E-auction portals are also mushrooming in India, helping banks list their properties and find potential investors. While AuctionTiger, NPAsource, Bank e-Auctions are the leading players, Foreclosure and Entrust are among the new entrants.

A senior banker said, "The ARCs are also taking the same amount of time as the banks. So I don't see an upside in offloading to them. I would rather have specific recovery teams to go after the defaulters, plan out auctions and recover the money. This is working out faster and more efficient."

The State Bank of India (SBI) has listed its properties with Auctiontiger and Bank e-Auction portals and also set aside some properties for sale to the ARCs. Auctiontiger is one of the oldest portals with 60,000 properties listed including all the Sahara properties, Kingfisher properties and AgriGold.

Devendra Jain, founder, NPAsource, said, "About 50% of the commercial and residential properties are getting sold but the industrial units are stuck without buyers with the economic revival uncertain and financial crisis bogging down many potential buyers. No one wants to spend on industrial units when there are so many economic uncertainties."

CARE Ratings in an analysis of 24 public sector banks and 15 private sector banks said, "Gross NPAs continued to increase in 2016 by 59.3%, higher than 49.9% reported in 2015. This was witnessed in both PSBs (public sector banks) which was almost stable at 56.4% (50.1% in 2015) and private banks where they increased sharply by 84.2% (47.7%). The Gross NPA ratio was high at 9.3% for the entire sample with PSBs having a ratio of 11.2% and private banks 4.1%. Both sets of banks witnessed an increase in this ratio over this time period. The comparable ratios in 2015 were 7.2% and 2.5% respectively."

Rakesh Sinha, director at e-listing portal Auctiontiger, said in an email response, "This month, about 5,000 properties got listed with us. Auctiontiger conducted more than 50 mega e-auctions and has more than 60,000 properties listed on its portal. It has trained more than 25,000 buyers till date and deals in all types of properties - residential, commercial, land – agriculture & industrial, helping banks recover around over Rs 7,000 crore of assets."

"About Rs 20,000 crore of assets are showcased for the auctions but no sales have taken place due to disagreements on the price and also the discounts," said a senior official from a leading ARC.

Smaller public sector banks such as Indian Overseas Bank, Indian Bank and UCO Bank have all put their properties up for auctions on their website. IOB has about 444 properties listed all over India worth a couple of thousand crores. In many cases, it is not just the recovery units of banks but all employees are involved in the recovery efforts.

"It is mostly the retail and small and medium industries kind of properties that are getting sold. The marquee properties are getting stuck as buyers fear litigation. In many cases like the Kingfisher properties, the reserve price is revised many times over; even then it gets stuck," said an official from bank e-auctions portal.