Lenders sold less than R1,000 crore of bad loans to asset recontruction companies (ARCs), against a target of R4,500 crore, before March 31. The lack of enthusiasm among ARCs will force banks to carry over R3,500 crore worth of NPAs on their books as they enter the new financial year, sources said.
While selling the R4,500 crore worth of bad loans was part of an annual exercise by bankers to clean up their balance sheets in the last quarter, the market has seen a higher number of loans up for sale this year.
In the previous financial year, banks had put up only about R3,500 crore worth of bad loans on sale during the January-March quarter, a senior official with an asset reconstruction company said.
Asset Reconstruction Company of India (ARCIL), which is the largest player in the ARC market, bought less than R500 crore worth of bad loans of the total loans sold to these companies. Arcil had reported a net profit of R85 crore in the financial year 2011-12, buying assets worth less than R100 crore.
The main reason that ARCs are not buying these bad loans are the steep prices charged by the banks. Nearly three years ago, banks used to give discounts of over 50%, however, the discounts today are not very attractive and both sides have not been able to arrive at a proper price, said a senior executive of an ARC.
IDBI Bank had put up around R880-crore worth of bad loans, and Punjab National Bank and Allahabad Bank had announced sale of about R600 crore of NPAs each, this year.