IDBI Bank seeks to sell Rs5,000 crore of non-core assets
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Mumbai: IDBI Bank Ltd said on Friday that it would sell Rs5,000 crore of non-core assets this fiscal year as it seeks to reinforce capital, less than a month after the central bank invoked its so-called prompt corrective action because of its rising bad loans and negative return on assets.
“We have formed a committee under the chairmanship of the deputy managing director to work around right valuations. We are expecting in this financial year to mobilize around Rs5,000 crore,” Mahesh Kumar Jain, managing director and chief executive officer of IDBI Bank, said in a call with analysts.
The bank received a Rs1,900 crore injection in March from the government. IDBI Bank’s board on 30 May approved a proposal to raise Rs10,000 crore equally through a sale of equity and rupee bonds.
On 9 May, the Reserve Bank of India (RBI) invoked prompt corrective action against IDBI Bank, after mandating a maximum net non-performing asset (NPA) ratio of 6%, breaching which could result in the central bank asking lenders to sell assets, cut unsecured exposure and so on.
“Over 78% of non-performing loan book is out of large corporate accounts under (a) consortium, which can’t be resolved by regular recovery process… Point of reduction in NPA of this category will primarily be upgrade of accounts,” Jain said.
To revive growth, the bank aims to aggressively chase loan recovery and prevent slippages, improve its capital adequacy ratio, increase its retail and priority sector lending base and reduce operational costs.
Slippages (new loans turning bad) in fiscal year 2016-17 reached Rs27,575 crore and the management believes that in the current fiscal year, it will be no more than half that level.
Gross NPAs or bad loans jumped by 80% to Rs44,752.59 crore in the quarter ended March from Rs24,875.07 crore a year earlier.
As a percentage of total loans, gross NPAs stood at 21.25% at the end of the March quarter, compared with 15.16% in the previous quarter and 10.98% in the same quarter a year earlier.
“There will be some moderation in slippages for the public sector banks in the coming financial year. With the government’s thrust on recovery, which is expected to materialize, we can see improvement in non-performing assets number,” said Karthik Srinivasan, senior vice-president at rating agency Icra Ltd.