The assets on the block include some large accounts as well as some loans to small businesses where exposure is under Rs 50 crore.
Fifteen banks have placed bad loans worth a total Rs 10,201 crore on sale to asset reconstruction companies (ARCs) so far during Q2FY22, data compiled by FE showed. The assets on the block include some large accounts as well as some loans to small businesses where exposure is under Rs 50 crore.
Lenders have been looking to offload some retail and micro, small and medium enterprises (MSME) loans as also some larger non-performing assets (NPAs) where they expect quick resolutions through an auction process.
Some of the large assets which are at various stages of the auction process include JBF Industries, Imagicaaworld Entertainment, JBF Petrochemicals, Sew Infrastructure and IVRCL Chengapalli Tollways.
In Q1, recovery of Rs 5,824 crore in the stressed Kingfisher Airlines had boosted the profits of quite a few public sector banks.
At the same time, smaller enterprise borrowers account for a chunk of the NPA sale lists of some banks, such as Bank of Baroda. The bank is seeking buyers for loans worth Rs 2,378 crore, including accounts where the asset is being offered by the whole consortium. Its sale list includes a large number of accounts where the exposure ranges between Rs 1 crore and Rs 20 crore. Bank of Baroda has also put one home loan account on sale.
Quite a few ARCs in the private sector have been showing interest in acquiring smaller NPAs in the retail and MSME segments, which have been hit harder than corporates by the Covid-19 pandemic. In previous quarters, too, banks such as IDBI Bank have tried to sell retail NPAs, but disagreements over pricing are understood to have led the lender to hold on to those loans.
“Retail NPA sales are more common by non-banking financial companies and smaller private banks. Public sector banks are not too active in the segment,” said a senior executive with an ARC, adding that activity in this segment is likely to increase.
Bankers, analysts as well as the Reserve Bank of India have been flagging the rising levels of delinquencies in the retail and MSME segments. Smaller loans are becoming a more significant area of activity for ARCs as the National Asset Reconstruction Company gets set up to resolve NPAs of over Rs 500 crore.
In a recent report, rating agency Crisil said, “ARCs are expected to circle stressed accounts in the MSME and retail segments in the near-to-medium term, given the twin challenges of inadequate funding access and intensifying competition once the proposed National ARC materialises.”