Bank of India puts up NPAs with outstanding Rs 1,500 cr for sale

Some of borrowers whose NPAs being sold include Pyramid Saimira, Koutons Retails, and XL Energy

Public sector lender Bank of India (BOI) has put on sale non-performing assets (NPAs) of 64 accounts with outstanding balance of Rs 1,552 crore as step to clean up balance sheet.

Some of the borrowers whose NPAs are being sold include Bombay Stock Exchange (BSE)-listed -- Pyramid Saimira (multiplex operator), Koutons Retails, a retailer of readymade and fashion wear, and XL Energy. Other names include Zoom Developers, Victory Transformers and Victory Electricals.

Senior BOI official said “this is first time that bank is attempting to sale of bad loans. Where there is security (including collateral) for account, we are trying to explore possibility (for auction)”. Besides direct recoveries, sale is one more route for realizing outstandings.

 
Bank has made 100% provision in most of cases. So whatever bank recovers from sell to asset reconstruction companies (ARCs) or non banking finance companies will add to bottom-line, he added.

A chief executive of large ARC said many banks have been coming out proposals for selling NPAs but most of them have had limited success. The main point of contention between banks and asset reconstruction has been pricing. (Banks look to extract maximum value while ARCs are put lower quotes, often breaking down negotiations)

Also, ARCs have pointed out that banks tend to put old accounts on block where chances of recovery are minimal, he added. Another Bank of India executive pointed out the economic growth is subdued and business is down for most of the companies.

The revenues are down and working capital cycles are stretched as customers delay payments (to companies).

In this backdrop banking industry will continue to see slippages for another two quarters. Though, additions (of non-performing assets) may not be at same pace (elevated) as seen in the last few quarters, he said.

BOI’s Gross NPAs rose to Rs 9,414 crore (3.04%) at end of June 2013 from Rs 8,765 crore (2.99% ) at end of March 2013. The provision coverage ratio (for NPAs) was 60.97% in June 2013, slightly up from 60.92% in March 2013.