In a bid to reduce its non-performing assets (NPAs), Punjab National Bank (PNB) has entered into compromise settlements at throwaway prices.
It has settled for less than half the outstanding amounts in the case of 10 large corporate accounts during 1995-96.
The bank has waived over Rs 17.07 crore from these corporate accounts comprising loan amount of Rs 50 lakh and above.
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Of a total loan amount of Rs 31.74 crore outstanding in 10 corporate accounts, the bank managed to recover only Rs 14.68 crore.
The rest was written off as part of the compromise settlements entered into by the bank with the corporate borrowers concerned.
The corporates whose loans have been so waived include Swan Mills Ltd in the eastern zone for whom Rs 663.11 lakh has been waived.
Large amounts have also been written off in the case of Arihant Agro Foods (Rs 238.11 lakh) in the western zone, South India Cement (Rs 283.78 lakh) in the southern zone and Rishab Ispat Ltd (Rs 177.42 lakh) in the northern zone (see table).
Many commercial banks waive part of the amount of the loan outstanding usually the interest componentin a compromise settlement with the borrower when the bank feels that there is no hope of the full amount being recovered.
Uco Bank, for example, had waived nearly Rs 111 crore in the last fiscal.
This is one way for commercial banks to recover at least part of a non-performing asset (NPA).
In 1995-96, PNB waived a total of Rs 20.30 crore. Despite these waivers, the banks total NPAs stood at Rs 2,517 crorea significant 18.7 per cent of total advances.
PNB, a 102-year-old bank, last year posted a net loss for the first time in its history. This year, however, the bank is poised to stage a remarkable recovery.
From a loss of Rs 95.92 crore last year, the bank hopes to make a profit of over Rs 300 crore this year.
Significantly, bank sources feel that one major reason for this turnaround has been a sharp decline in the banks ratio of non-performing assets to total advances from 18.7 per cent in the last fiscal to an estimated 12-13 per cent this fiscal.