Public-sector banks (PSBs) have put on sale non-performing assets (NPAs) worth Rs 8,706 crore since the signing of the inter-creditor agreement (ICA) on July 23, implying that they will continue to look for other ways to palm off exposures to bad loans unilaterally and make quick cash recoveries. All PSBs have signed the ICA.
Indeed, if NPA sales by lenders who have not signed the ICA were taken into account, the cumulative outstandings on sale would stand at Rs 20,810 crore. While IFCI has put loans worth Rs 11,042 crore on sale, Axis Bank has sought buyers for exposures worth Rs 1,062 crore.
State Bank of India (SBI) recently sought buyers for two accounts with a total outstanding of `2,490 crore. The accounts are Bombay Rayon Fashions (`2,261 crore) and Shivam Dhatu Udyog (`229 crore). Importantly, the bank intends to make 93.34% cash recovery from the first account and a full cash recovery from the second. Bidding for the two accounts will be held on August 20.
Bank of India (BoI) on Monday sought bids for 50 accounts with an aggregate outstanding of `5,558 crore on a 100% cash basis. The list includes BoI’s exposures to Dighi Port (`273 crore), Korba West Power (`240 crore), Lavasa Corporation (`328 crore), Sakthi Sugars (`161 crore) and Visa Power (`146 crore). Expressions of interest (EoIs) must be sent in by Tuesday.
“After receipt of indicative bids from the intending buyers, wherever required, the bank will run the process under Swiss challenge method for those specific accounts, which will be intimated to all the participating investors not later than one day before the day of e-bidding,” BoI said in a public notice. The e-bidding is scheduled for September 3 and will be held on September 10 in case of extended due diligence.
On Monday, Dena Bank also put on the block 87 NPA accounts with a total outstanding of `659 crore. The names and amounts outstanding for each individual account could not be immediately ascertained. Dena will make the sale on either cash basis or through a mix of cash and security receipts (SRs). E-bidding for the accounts will be held on September 5.
Banks selling piecemeal exposures to mid-sized accounts gains significance in the light of certain clauses within the ICA. Under the terms of the ICA, in case a lender dissents to the resolution plan agreed upon by 66% of the members of a lending consortium, the lead lender shall have the right to arrange for buyout of the facilities of the dissenting lender at a value that is equal to 85% of the lower of liquidation value or resolution value. This was expected to enforce unanimity among lenders to ensure quick resolution of stressed accounts. However, as banks continue to sell their respective bad-loan exposures, that objective may already have been undermined.