 "PNB's Rs 9,000-cr bad loan sale stuck due to absence of full time CEO")
Punjab National Bank (PNB)’s plan to sell bad assets of Rs 9,000 crore, announced earlier this financial year, is stuck as the government is yet to appoint a full-time chief executive officer (CEO) for it.
The proposed asset sale was one of the highest in the history of the bank, fighting a sharp rise in bad loans like other public sector banks (PSBs).
“PNB had announced it would sell its bad loans about three months back. Nothing has moved so far. It seems they want to take the decision under a full-time CEO,” said a banking official.
The chairman and managing director (CMD)’s post has been vacant since end-October last year, when the government declined to extend K R Kamath’s tenure. Later, the government decided to split the post of a CMD into one of a non-executive chairman and a managing director. A selection process to appoint chief executives to five large PSBs, including PNB, was initiated. However, the process was delayed for various reasons including availability of eligible candidates.
Meanwhile, the government has given additional charge of MD & CEO to one of the executive directors at PNB.
The bank’s gross non-performing assets (NPAs) went up 36 per cent in 2014-15 to Rs 25,695 crore, 6.5 per cent of its gross advances. Consequently provisions for bad loans went up by 76 per cent during the previous financial year to Rs 7,979 crore.
Banks with high NPAs are looking to offload some of these to asset reconstruction companies (ARCs) to clean up their balance sheet. The Reserve Bank of India has revised the norms regarding stressed asset sale to encourage the banks. The banking regulator has mandated higher cash payment by ARCs, allowed banks to spread their losses arising out of asset sale over eight quarters and also allowed lenders to sell standard assets, which show signs of stress. Earlier, only NPAs were allowed for sale.
The proposed asset sale was one of the highest in the history of the bank, fighting a sharp rise in bad loans like other public sector banks (PSBs).
“PNB had announced it would sell its bad loans about three months back. Nothing has moved so far. It seems they want to take the decision under a full-time CEO,” said a banking official.
The chairman and managing director (CMD)’s post has been vacant since end-October last year, when the government declined to extend K R Kamath’s tenure. Later, the government decided to split the post of a CMD into one of a non-executive chairman and a managing director. A selection process to appoint chief executives to five large PSBs, including PNB, was initiated. However, the process was delayed for various reasons including availability of eligible candidates.
Meanwhile, the government has given additional charge of MD & CEO to one of the executive directors at PNB.
The bank’s gross non-performing assets (NPAs) went up 36 per cent in 2014-15 to Rs 25,695 crore, 6.5 per cent of its gross advances. Consequently provisions for bad loans went up by 76 per cent during the previous financial year to Rs 7,979 crore.
Banks with high NPAs are looking to offload some of these to asset reconstruction companies (ARCs) to clean up their balance sheet. The Reserve Bank of India has revised the norms regarding stressed asset sale to encourage the banks. The banking regulator has mandated higher cash payment by ARCs, allowed banks to spread their losses arising out of asset sale over eight quarters and also allowed lenders to sell standard assets, which show signs of stress. Earlier, only NPAs were allowed for sale.