UTI Bank has picked up Rs 1000 crore loans from ICICI's books. This is part of Rs 4,000 crore worth of assets that ICICI has sold to a clutch of banks and institutions.
The other banks which had picked up the portfolio include HDFC Bank and IDBI Bank. Some public sector banks, mutual funds and a nationalised insurance company have also picked up corporate papers.
ICICI also sold a small portion of its retail loan portfolio -- about Rs 100 crore -- testing the appetite of the market. According to sources, UTI Bank has picked up the largest chunk of these assets of around Rs 1,000 crore at an interest rate of around 12 per cent.
Sources said that these assets were primarily corporate loans with a rating of A+ and AA. Most of these loans are secured by movables and have a residual tenure of around two-and-a half years.
HDFC Bank has taken up around Rs 100 crore of auto loan receivables. The residual tenure of these loans were around 51 months.
Rating agency Crisil has given a rating of AAA on these loans. The cash collateral on these auto loans were at 5 per cent and there was no over-collateral on these loans.
In order to take it to a AAA portfolio through a credit enhancement an over-collateralisation or a credit enhancement was done.
According to sources, normally the range of over-collateralisation is at around 15 to 20 per cent while the cash collateral was at around 10 to 15 per cent.
Around 25 per cent of the Rs 4,000 crore shrinkage in ICICI assets was due to prepayments of loans. ICICI has charged penal interest for pre-payments which would compensate for the loss in interests. In some of these loans ICICI still has some relationship left.
The Unit Trust of India has also picked some of the corporate papers along with a nationalised insurance company. According to sources, a host of banks both public and private sector are in talks with the financial institution for buyout of assets. The current tranche of Rs 4000 crore was sold over the last three months.
According to observers banks have picked up these loans assets as there has been a slow-down in the offtake of credit in the industry. They can also check for the performance of the loans over the last few years before they pick up the loans.
ICICI is expected to shrink its balance sheet size by another Rs 4000 crore by the end of the fiscal 2002. However, ICICI is expected to sell mostly corporate paper and loans and not their retail loans portfolio. The current tranche of Rs 100 crore was only to test the market.
