UTI recovery unit eyes overseas marts

The company is starting out with NPAs of Rs 40,000 crore

UTI-I, the specified undertaking of UTI, is looking at non-performing assets (NPAs) of overseas institutions. ASREC Ltd, the asset reconstruction company promoted by UTI-I, plans to move to global markets in the near future.

Ajjet Prasad, executive director of UTI Mutual Fund, said that the future of asset management (in terms of managing NPAs) lay in acquiring such assets from markets outside India.

The company, incidentally is starting out with initial NPAs of Rs 35,000-40,000 crore, of which Rs 7,000 crore is sourced from UTI-I itself, with the remaining coming from other institutions and banks, some of which have co-sponsored the ARC.

The ARC is expecting to become profitable at the end of the first year of operations itself, Prasad said.

Apart from outright buying of assets at a negotiated price, fixed by independent valuers, and acting as an agency for institutions which do not want to sell their assets, the company is also looking at securitising the receivables (securitised receipts) and creating a market for them.

It would be paying lenders cash for the assets which are on their books.

Prasad said this was an international practise and Indian ARCs had to follow this trend if they are to be profitable.

With the Indian financial system becoming more efficient and the economy recovering, NPAs are bound to go down.

So Indian ARCs will have to source their NPAs from locations outside India as a way of survival.

The Indian banking system, which was once the respository of huge NPAs, has been reducing them gradually. Allahabad Bank, today, for instance announced that it net non-performing assets was below 2 per cent.

Domestically, apart from banks and financial institutions, the ASREC is also targeting non-banking finance companies which are sitting on a substantial "pile of NPAs", said Prasad.

Thr ASREC has a capital Rs 10 crore, which will be raised to Rs 110 crore when other banks and institutions subscribe to more capital. The RBI licence was obtained on October 11.

UTI-I holds 35 per cent equity in the company, followed by Bank of India at 22.5 per cent, Allahabad Bank at 16.5 per cent, Indian Bank at 10 per cent, while other institutions account for the rest.