Indian Bank on Thursday put up 17 non-performing assets (NPAs) with a total exposure of Rs 1,013 crore on sale to asset reconstruction companies (ARCs). These NPAs include five fraud accounts. In September 2021, the Reserve Bank of India (RBI) had allowed banks to sell fraud accounts to ARCs.
The fraud accounts on sale are Aradhya Steel (Rs 28 crore), Paramount Airways (Rs 102.52 crore), Palpap Ichinichi Software International (Rs 22 crore), Agarwal Industries (Rs 291 crore) and Ramnandi Hotel Resorts (Rs 67 crore). All the accounts are being offered on a full-cash basis.
The sale of the fraud accounts will be made as per the provisions of the RBI circular dated September 24, 2021. “Consequently, the responsibilities of the transferor with respect to continuous reporting, monitoring, filing of complaints with law enforcement agencies and proceedings related to such complaints shall also be transferred to ARCs,” Indian Bank said in a notice.
While the central bank has permitted sale of fraud assets to ARCs, not too many such deals have taken place. According to executives in the stressed assets industry, ARCs may not be too keen on fraud assets due to the risks associated with the process of investigation.
Industry executives said the RBI allowed the sale of fraud assets chiefly in a bid to ease the transfer of some large fraud accounts to the National Asset Reconstruction Company (NARCL). At the same time, the relaxation does help ARCs looking to aggregate the exposures of all banks to a particular company in cases where one or more of the lenders may have classified the relevant exposures as ‘fraud’.
“Buying fraud accounts makes sense only for aggregation. We will not buy a case which has been freshly classified as fraudulent as that means handling the (investigative) agencies,” said a senior executive with a leading ARC.