PNB floats one-time settlement to clear small-ticket bad loans

To clean up books, Punjab National Bank has floated a one-time settlement scheme (OTS) for loans up to Rs 5 crore. The recoveries will improve bottom line.
 

The Delhi-based public sector lender is also working on plans to monetise non-core assets. The assets and investments under consideration for sale include stakes in primary dealer (PNB Gilts), housing finance company (PNB Housing Finance) and insurance venture, its managing director and chief executive Sunil Mehta told reporters here on Friday. The value of non-core assets is about Rs 10,000 crore.

Under OTS, the lender is working on two segments of non-performing asset (NPA) categories. One is for those where the bank has already made 100 per cent provision. The recoveries under OTS in this segment will directly add to profits. The second category of loans is where the bank will have to shell out additional amounts to reach provision level of 100 per cent by March 2018. Under OTS, PNB may actually get some through recovery instead of making provision, senior executives said.

These small-ticket accounts are large in number, involving a lot of process work and time. After cleaning up these bad loans, the bank can deploy staff for business mobilisation.

Fresh slippages into the bad loan category for advances up to Rs 5 crore was Rs 2,564 crore in the first quarter ended June 2017 against Rs 2,218 crore in April-June 2016.

Gross non-performing assets of the bank stood at 13.66 per cent in April-June 2017 against 12.53 per cent in the previous quarter. However, these were slightly lower from 13.75 per cent a year ago. The farm debt waiver in five states, change in the definition of NPAs for medium, small and micro enterprises resulted in higher bad debts sequentially.

In absolute terms, gross NPAs rose to Rs 57,721 as on June 30, 2017, against Rs 55,370 crore as of March 31, 2017. After providing for NPAs, net bad debts stood at 8.67 per cent at the end of the first quarter of 2017-18 against 7.81 per cent at the end of the fourth quarter of 2016-17.

PNB had NPAs in nine of the 12 cases referred for insolvency. PNB provided for 35 per cent for these bad debts and has to provide another 15 per cent or Rs 1,000 crore to meet the Reserve Bank of India guidelines.

Besides RBI referred cases, the lender has taken 13 accounts on its own for resolution at NCLT, involving about Rs 350 crore.

Resolving bad loans

* The public sector lender is also working on plans to monetise non-core assets

* The value of non-core assets is about Rs 10,000 crore

* The lender is working on two segments of  NPA categories

* Gross NPA of the bank stood at 13.66% in April-June 2017 against 12.53%  in the previous quarter

* In absolute terms, gross NPAs rose to Rs 57,721 as of June 30, against Rs 55,370 crore as of March 31