Realty boom grounds Indian Bank bad loans

Bank recovers Rs 290 cr by selling mortgaged properties.

If you thought that it is only the construction industry which is booming with soaring property prices across India, think again.

Banks too are making most of the boom to recover their bad debts.

K C Chakrabarthy, chairman and managing director, Indian Bank, said rising property prices have helped the bank get better prices for the properties pledged as securities with it and, therefore, improve the recovery of its bad debts.

Indian Bank recovered about Rs 290 crore for the nine months ended December 31, 2005 against Rs 208.1 crore during the same period last year.

Chakrabarthy said almost 80 per cent of the recoveries made by the bank during the period were via auction of the properties attached as securities.

The recoveries made by the bank assume more significance as Indian Bank's was on the brink of bankruptcy a few years ago due to huge accumulated losses.

The bank's balance sheet even now shows about Rs 3,800 crore of accumulated losses.

Indian Bank has, on its website, listed the properties to be auctioned and those which are up for sale as well.

This is necessary before auction of any property. Chakrabarthy said the open listing of the properties up for sale has enabled the bank shorten the recovery time as many bad debtors are actually willing for a settlement.

EID Parry turned out to be the highest bidder when it paid Rs 50.20 crore to take possession of New Horizon Sugar Mills, auctioned by Indian Bank last year, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Srafesi) Act, 2002.

In another instance, a defunct property of Standard Motors spanning 57 acres was auctioned for about Rs 154 crore in November 2005.

The sale would enable Indian Overseas Bank to recover about Rs 40 crore.

In the last one year, banks have been able to take this bold step as the Srafesi Act empowered them to auction the properties attached as collateral in the event of their becoming bad assets, and this was also backed by a Supreme Court verdict.