SASF may sell select NPAs for upfront cash

Mumbai, April 20 | Updated: Apr 21 2005, 05:36am hrs
The Rs 9,000-crore Stressed Assets Stabilisation Fund, set up by the government to takeover the non-performing assets (NPAs) of the erstwhile Industrial Development Bank of India (IDBI), is considering selling off some of the sticky accounts for up-front cash payment.

According to a high level source, several banks, including Kotak Mahindra Bank, have approached the fund for buying out some of the assets. We may consider selling off some assets, if we are able to get a cash payment upfront, said the source.

Even as the fund is considering proposals from the banks, it has ruled out any transaction with asset reconstruction companies as an option for selling bad assets.

We are not interested in investing in security receipts, hence, asset reconstruction companies are ruled out. We prefer cash payments as that enable us to return the money to the government much faster, said the source.

Kotak Mahindra Banks executive director Dipak Gupta confirmed that the bank had approached SASF for buying stressed asset portfolio. We are interested in picking up some small and medium sized accounts in the range of Rs 5-10 crore at an appropriate negotiated price.

The bank is in the business of acquiring small sized NPAs. We normally make a one-time downpayment for the portfolios that we acquire, said Mr Gupta. The bank recently also bought out ICICI Banks sticky loan portfolio.

While the bank was not particular about the sector, Mr Gupta said that they would consider buying a portfolio where there was good possibility of repayment.

We will examine the legal cases filed in respect of that account, and the status of the outstanding cases, the underlying securities of the asset, the promoter, whether there are any tangible assets like land, etc, while considering the portfolio.

Accordingly, IDBI transferred 636 bad accounts having a net asset value of Rs 9,000 crore to SASF. Of the 636 cases, about 100 cases are entirely IDBI-handled cases, i.e. IDBI is the single lender in all the 100 cases. The fund was given a time period of 20 years to resolve the NPAs and return the Rs 9,000 crore back to the government.

Since becoming operational in October 2004, the fund has managed to return around Rs 206 crore to the government, as on March 31, 2005.