 "Stressed assets' sale gathers pace")
State Bank of India (SBI), India’s largest lender, sold Rs 3,500 crore of NPAs. Other public sector lenders such as Punjab National Bank, Bank of India and UCO Bank also sold stressed assets.
Bankers say a significant part of SBI’s stressed assets were sold for security receipts, though some smaller accounts were also sold for cash. For security receipts, banks have to make mark-to-market provisions (asset calculation at current values) if the amount is not realised in three years. If a bank sells a written-off account for which entire provisioning has been made, all the receipts from the sale are added to the profit-and-loss account.
Typically, lenders get five per cent of the sale value in cash and the rest in the form of security receipts, bankers say.
As of December-end 2013, SBI had gross NPAs of Rs 67,799 crore, 5.73 per cent of its gross advances. High NPAs had weighed on the bank’s profit, which fell 34.2 per cent year-on-year to Rs 2,234 crore in the December quarter.
While Chennai-based Indian Overseas Bank sold NPAs worth Rs 1,000 crore, private sector lender Federal Bank sold a small amount of stressed assets to ARCs.
Bankers say the new guidelines for asset sale, issued last month, have boosted such activity. “Sale to ARCs at a stage when the assets have a good chance of revival and a fair amount of realisable value, for rehabilitation and reconstruction, is encouraged,” the central bank had said, while allowing banks to sell standard assets.
LEAVING BEHIND TROUBLED TIMES
* The move, following a push from RBI, is likely to boost banks’ profitability for the March quarter
* A significant part of SBI’s stressed assets were sold for security receipts
* Other banks which sold their NPAs included Punjab National Bank, Bank of India, UCO Bank, Indian Overseas Bank and Federal Bank
* The new guidelines for asset sale have boosted such activity, say bankers