Indian Bank plans largest NPA sale worth Rs1,750 cr

Indian Bank plans largest NPA sale worth Rs1,750 cr

Hyderabad: State-owned Indian Bank is all set to finalize the sale of non-performing assets (NPAs) amounting to around Rs1,750 crore within the next two weeks, according to the lender’s chairman and managing director, M.S. Sundara Rajan.

The planned sale apparently is the single largest sale of NPA portfolio of an Indian bank, according to Rajan.

The single biggest bad loan sale so far reported was that of ICICI Bank Ltd, which had sold Rs1,400 crore of its NPA portfolio to Standard Chartered Bank Plc.

Interestingly some years back, Indian Bank was the beneficiary of the single biggest bailout package of Rs1,300 crore in the Indian banking industry from the Union government.

Asset Reconstruction Co. of India Ltd(Arcil), Arsec India and Pegasus Asset Reconstruction are among the five entities that have shown interest in buying the bad loans portfolio of Indian Bank, said Sundara Rajan, who refused to to name the other players.

“We are currently evaluating the offers submitted by these asset reconstruction companies (ARCs) and we expect to finalize the deal in the next fortnight," he told Mint.

Sundara Rajan said the bank is evaluating the bids to see which offers more value realization.

Currently, Indian Bank has around Rs550 crore of NPAs on its books, while around Rs1,200 crore of bad loans have been written off till date.

“This takes our total sticky assets portfolio size to around Rs1,750 crore," Sundara Rajan said. “If the offer is really attractive, then we will sell the entire bad loan portfolio at one shot. One of the points of our study in the current evaluation exercise is to see which of the bidders offer attractive upfront payments, in one go."

He said the bank has not yet finalized where it will invest the proceeds from the sale of bad loans. “There are various options before us," he said. “We want to use the proceeds primarily for our credit expansion. In the absence of attractive opportunities for credit expansion, we will consider temporarily parking these funds in money market mutual funds and non-Statutory Liquidity Ratio securities that offer good returns."