Public sector lender Indian Overseas Bank has invited bids for the sale of 91 MSME NPA (non-performing assets) accounts of Rs 457.28 crore. According to a bid document ‘Transfer of NPA loan exposures’, the bank expects a minimum 60 per cent (Rs 274 crore) recovery with 50 per cent (Rs 137 crore) in cash.
The reserve price set by the bank is 60 per cent of Rs 457 crore outstanding as of September 30, 2023, with a 50:50 ratio of cash and security receipts portion. The loan amount outstanding across 91 accounts was between Rs 3 crore and Rs 10 crore.
“The bids shall be given for the portfolio of the accounts on Cash 50% plus SR 50 % basis, preference will be given to Bid / offer with higher cash portion. Excess recovery after redemption of Security Receipts i.e. upside, if any, will be shared by Bank and ARC on 80:20 basis,” the bank said.
The notification for inviting bids from asset reconstruction companies (ARCs), banks, NBFCs, AIFs, and small finance banks was released by the bank on November 6 and the last date of submission was November 14 while bidding through the online auction will begin on November 28, according to the notification.
As per the data shared in the Parliament in July this year by MSME Minister of State Bhanu Pratap Verma, the gross NPAs in MSME loans by scheduled commercial banks (SCBs) had dropped by 14.3 per cent to Rs 1.31 lakh crore for FY23 from Rs 1.54 lakh crore during FY22.
The minister had noted that MSME GNPAs during FY23 were the lowest in the past five years, peaking at Rs 1.83 lakh crore in FY20 from Rs 1.63 lakh crore in FY19 and declining to Rs 1.82 lakh crore in FY21 before shrinking to Rs 1.31 lakh crore in the previous fiscal.
While GNPAs continue to decline, ratings agency Moody’s Investor Services earlier this year had noted that loans to SMEs continue to pose risks to the asset quality of the banking system as the segment is most vulnerable to rises in interest rates, FE had reported. “However, the credit growth will be supported by the underlying growth potential in the economy.”
Particularly, under the Emergency Credit Line Guarantee Scheme (ECLGS), which was launched post-Covid for emergency credit to MSMEs and was valid till March this year, NPAs stood at Rs 13,233 crore as of June 30, 2023, according to the data shared by Bhagwat Karad, Minister of State in the Finance Ministry in a written reply to a question in the Lok Sabha on July 24.
The bad loans had constituted 5.45 per cent of the total MSME loan amount of Rs 2.42 lakh crore guaranteed under ECLGS.