NPA sale to get a push this fiscal

In a bid to cut their net non-performing assets (NPAs) to less than 2 per cent, public sector banks (PSBs) are expected to increase the sale of bad loans in the current financial year.

In addition, recovery efforts are also expected to be stepped up as a result of finance minister P Chidambaram's directive to these banks to contain NPAs.

PSBs have been reluctant sellers of bad loans to Asset Reconstruction Company India Ltd (Arcil). Of the Rs 14,926 crore of bad loans acquired by Arcil till March 2005, the share of these banks is less than 40 per cent.

ICICI Bank alone has sold NPA worth Rs 8,450 crore, which is over 56 per cent of the total assets bought by Arcil.

Dena Bank chairman M V Nair said, "Selling bad loans to Arcil is one of the options. The bank will also have to ensure that addition of fresh NPAs is contained."

Dena Bank and Punjab and Sind Bank have the highest net NPA ratios at over 5 per cent. Dena Bank's net NPA as at the end of March 2005 was 5.23 per cent of net advances, down from 9.40 per cent in March 2004.

Meanwhile, that of Punjab & Sind Bank has remained sticky over the years. The bank has been able to reduce its net NPA to 9.57 per cent in March 2004 from 12.27 per cent in March 2001.

PSBs will also need to make enhanced provisioning to bring down net NPAs.

Apart from Dena Bank and Punja & Sind Bank, six other PSBs have net NPAs of above 2 per cent, the tolerable level the finance minister has set for them.

Bank of India's net NPA at end-March 2005 was 2.77 per cent, Bank of Maharashtra 2.15 per cent, Central Bank of India 2.98 per cent, State Bank of India 2.65 per cent, UCO Bank 2.93 per cent, Union Bank of India 2.64 per cent and United Bank of India 2.43 per cent.

Net NPA of PSBs as a whole has fallen to slightly above 2 per cent at the end of March 2005 from 2.98 per cent at end March 2004.