Andhra Bank puts up Rs 3,871-crore NPA assets for sale, prefers cash bids

The bank has already sold NPAs worth Rs 800 cr in the quarter ended December 2016

Andhra Bank has put Rs 3,871 crore woth of non-performing assets (NPAs)up for sale. These NPAs involve 113 loan accounts with ticket sizes as large as Rs 507.63 crore owed by Andhra Pradesh-based Transtroy (India) Private Limited to as small as Rs 1.26 crore of N K Rubber Industries from Faridabad.

The bank has invited asset reconstruction companies (ARCs) to file bids on or before June 17.

Andhra Bank has chosen the sale route to reduce NPAs as the management finds it increasingly difficult to recover loans from such a large NPA portfolio with limited resources at the bank's disposal.

The bank's gross NPAs have more than doubled in the last two years and reached the level of 12.25% (Rs 17,669 crore) in March 2017 as compared to 5.31% (Rs 6,876 crore) in March 2015.

The provisioning towards bad loans rose to Rs 3,834 crore in 2016-17 from Rs 1,172 crore a couple of years ago. The provisioning requirements have shrunk the bank's net profit to Rs 174 crore in FY17 out of a total business of over Rs 3.3 lakh crore.

"Sale of NPAs is an ongoing process. Usually ARCs are quick and effective when it comes to the recoveries, more so in the case of large consortium loans as they will be able to aggregate these NPAs better," a senior Andhra Bank official said.

The bank has already sold NPAs worth of Rs 800 crore in the fourth quarter ended December 2016, according to the official.

Andhra Bank is one of the first commercial banks to initiate the asset sale after the Reserve Bank of India has revised the norms on NPA sales. Under the new norms ARCs will have to pay at least 50% of the purchase price in cash and the remaining in security receipts (SRs). Earlier only 15% the purchase price was mandated to be paid in cash.

The bank's management told the potential bidders that it will prefer cash bids over the cash plus SRs. Similarly higher cash component among the cash plus SRs bids will be given weightage in the auction, according to the bid document issued by the bank.

Andhra Bank's exposure to corporate sector has been declining for the past few years in the face of growing loan defaults and the subdued demand.

Its corporate and mid-corporate advances declined 3.29% to Rs 61,858 crore in FY17 from Rs 63,962 crore in the previous year. Gross credit growth, however, stood at 5.76% on the back of MSME and retail loan portfolio growth.