Rs 6,000 crore bad loans on sale as banks seek cleanup
Banks have put close to Rs 6,000 crore worth of bad loans on sale. IDBI Bank has bad assets worth Rs 2,200 crore on sale. Following it are Allahabad Bank (Rs 600 crore), Central Bank of India (Rs 550 crore), Karnataka Bank (Rs 450 crore) and Uco Bank (Rs 340 crore).
Other banks which sold their bad loans earlier this financial year are Federal bank, United Bank of India, State Bank of Travancore, Lakshmi Vilas Bank and South Indian Bank. Most of these loans came up in auctions towards the end of the third quarter and in the fourth quarter.
Shubhalakshmi Panse, CMD of Allahabad Bank, said, “We have put about Rs 600 crore worth of loans in auction sale to ARCs (asset reconstruction companies). Most of the loans are mid to large corporate advances. We do a lot of recoveries in-house. But most of these loans have legal issues for which we prefer seeking professional assistance of ARCs.”
The gross non-performing assets (NPAs) in the banking system stood at Rs 1,82,000 crore (3.5 per cent of total assets) as of September 30, 2012.
Gross NPAs of public sector banks were 3.23 per cent of gross advances at Rs 85,950 crore, while it was 2.34 per cent of gross advances at Rs 23,235 crore for private banks.
Banks generally go in for asset sales during the third and fourth quarters. This helps bring down their bad loans as well as provisions. The money received from assets sale goes into the profit and loss account.
P Rudran, MD and CMD of Arcil, said, “Many banks are putting bad assets up for sale, but no deals have taken place so far. Discussions on pricing of the loans are on. Most of the assets are advances to small and medium enterprises or to big accounts. About 25 per cent are recent NPAs.”
RK Bansal, executive director of IDBI Bank, said, “We offload bad loans to ARCs on an on-going basis. Legal issues surrounding these cases delay a settlement for years. There are cases which have not got resolved for as long as three decades.”
When an ARC buys a bad asset from a bank, it makes two part payments. One is down payment in cash; the other is a security receipt it issues to the back concerned. A bank can hold this receipt for seven years.
Though ARCs were set up to supplement bank efforts at resolving difficult cases, often no deal takes place due to disagreements over discounts. “There are banks which give 50 to 60 per cent discounts; some banks bring in very poor assets for sale without offering attractive discounts. The title deed or the underlying assets may be so poor that there may be hardly any money to recover,” said a senior ARC official.
http://www.mydigitalfc.com/banking/rs-6000-crore-bad-loans-sale-banks-seek-cleanup-584
Other banks which sold their bad loans earlier this financial year are Federal bank, United Bank of India, State Bank of Travancore, Lakshmi Vilas Bank and South Indian Bank. Most of these loans came up in auctions towards the end of the third quarter and in the fourth quarter.
Shubhalakshmi Panse, CMD of Allahabad Bank, said, “We have put about Rs 600 crore worth of loans in auction sale to ARCs (asset reconstruction companies). Most of the loans are mid to large corporate advances. We do a lot of recoveries in-house. But most of these loans have legal issues for which we prefer seeking professional assistance of ARCs.”
The gross non-performing assets (NPAs) in the banking system stood at Rs 1,82,000 crore (3.5 per cent of total assets) as of September 30, 2012.
Gross NPAs of public sector banks were 3.23 per cent of gross advances at Rs 85,950 crore, while it was 2.34 per cent of gross advances at Rs 23,235 crore for private banks.
Banks generally go in for asset sales during the third and fourth quarters. This helps bring down their bad loans as well as provisions. The money received from assets sale goes into the profit and loss account.
P Rudran, MD and CMD of Arcil, said, “Many banks are putting bad assets up for sale, but no deals have taken place so far. Discussions on pricing of the loans are on. Most of the assets are advances to small and medium enterprises or to big accounts. About 25 per cent are recent NPAs.”
RK Bansal, executive director of IDBI Bank, said, “We offload bad loans to ARCs on an on-going basis. Legal issues surrounding these cases delay a settlement for years. There are cases which have not got resolved for as long as three decades.”
When an ARC buys a bad asset from a bank, it makes two part payments. One is down payment in cash; the other is a security receipt it issues to the back concerned. A bank can hold this receipt for seven years.
Though ARCs were set up to supplement bank efforts at resolving difficult cases, often no deal takes place due to disagreements over discounts. “There are banks which give 50 to 60 per cent discounts; some banks bring in very poor assets for sale without offering attractive discounts. The title deed or the underlying assets may be so poor that there may be hardly any money to recover,” said a senior ARC official.
http://www.mydigitalfc.com/banking/rs-6000-crore-bad-loans-sale-banks-seek-cleanup-584
| NBFC body opposes stricter norms |
| RBI had suggested that NBFCs should be treated at par with banks so far as NPA classification is concerned |
| BS Reporter / Mumbai Jan 08, 2013, 21:40 IST Non-banking finance companies (NBFC) have objected the stringent provisioning norms that were proposed by theReserve Bank of India (RBI) and have argued that they are deprived of the benefit that banks enjoy. The RBI had suggested that NBFCs should be treated at par with banks so far as NPA classification is concerned. Currently, NBFCs need to classify an asset as non performing if the borrower defaults for 180 days. The NPA classification criterion now has been fixed at 90 days, same as banks. NBFCs have argued that this will hit them hard for two reasons. One that their borrowers generally come from unorganised and informal sections and there are some difficulties in terms of borrowers repayment due to various issues like fuel cost increase or insurance etc. However, this doesn’t essentially translate into default. Secondly NBFCs don’t get any tax benefit on their provisioning books unlike the banks. The Finance Industry Development Council (FIDC), a body of NBFCs has requested RBI to write to Finance Ministry of considering the tax benefit to NBFCs on provisioning books in the Union Budget. However, if RBI insists on tightening the provisioning norms to 90 days then it should allow NBFCs to use SARFAESI act like banks and implement the norms in the span of three years than prescribed two years in the draft norms, FIDC said. Tier 1 Capital FIDC in its representation to RBI said that existing tier-1 capital ratio to be maintained in view of difficulties in raising equity. The RBI in its draft norms had prescribed the tier-1 capital to be raised to 10% from existing 7.5%. For Captive NBFCs it was raised to 12%. They have argued RBI in last four years have consistently increased total capital adequacy ratio (CAR) from 10 to 15% because of which NBFCs are consistently raising capital for last three years. “To raise any further capital, the NBFCs will perforce need to absorb the capital already raised, exhibit appropriate returns to their stake holders before being able to access the capital market,” FIDC’s representation said. It further suggested if RBI wants to increase tier-1 capital ratio to 10% then RBI should lower the risk weightage in productive and low risk assets such as construction equipments (CE), commercial vehicles (CV) to 50% from existing 100%. Deregistration of small NBFCs The RBI in its draft norms said that the NBFCs having asset size less than Rs 25 crore need not be registered with RBI and also should be out of regulatory ambit of the central bank as they don’t create any systemic risk. FIDC argued that 70% of NBFCs will be deregistered and will be thrown out of the business at no fault of theirs and urged RBI to maintain status quo on the same. External Commercial Borrowings The NBFC body urged RBI to open ECB window also for asset financing NBFCs like infrastructure financing NBFCs to broaden the access to the funds. http://business-standard.com/india/news/nbfc-body-opposes-stricter-norms/202024/on |
when an SME is not NPA the bank officials declared it as NPA and when the aggrieved loanee went to high court and supreme court the Bank withdraws it stand and again in 2 months the same play the Bank continues and when the aggrieved loanee filed SA claiming Rs.600.00 lacs the Bank also have filed OA in the DRT, cbe. The loanee also has fetched a buyer for a best price for the properties and the prospective buyer also has deposited Rs.20.00,000 since four year, the Bank being idle and now trying to sell the book debts to ARC that too through collusion by sharing Banks' internal policies etc. The high court judges never know anything other than spelling go to DRT.
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