Useful tips to recover bad loans/NPA Acs

1.Every branch should maintain a master file having the lists of eligible star sanjeenvani accounts for the year, monthly sascal and NPA borrowers. The Lists should be sorted village wise. While going for recovery, our focus should not to cover many villages, rather to cover a single village and meet with each and every single account of that village coming under the three lists.

2. Ensure to get the mobile phone number of the borrower immediately. If the borrower is not available, then get their family members contact numbers.  Please make a note if there is any landmark near the borrower’s residence. Ensure to update these details in Finacle DC for future purposes.

3.Whosoever is going for recovery, always carry with yourself the below set of things – Mobile number updating forms , L444C or any other loan renewal document , OTS offer letter , Cash deposit and withdrawal challans. This comes easy to deal with borrowers.

4. What I believe that there is no use of visiting the same customer again and again , Identify and try to read his mind during the first visit only  that what type of customer he is and what’s the way to handle him in future like follow up through phone only , regular visits , settlement ,any legal action etc.

5. Whatever is the promises and dates of borrowers, note their words , take their signature and after returning to the branch, update the same in the master file so that whosoever is the next person going for recovery, has some baseline. Also try to know what will be the source of repayment according to the customer. If it is karkhana or any other person, try to contact them also.

6.Whosoever is going for recovery, avoid going inside the house and ensure that the communication should be outside the house only so that the passers and neighborhoods see that the bankers visited that particular household. Some borrowers are very sensitive about their images.

7. At least in a week, use Hacs menu and figure out the credit balances present in the saving account of NPA accounts. Transfer the balances immediately and reduce the NPA figures of your branch.

8. Also on daily basis, before proceeding for day end have a look at the cash vouchers and check if there any recovery in NPA account and parked in the office account . If it is so, immediately appropriate it to the account and reduce the NPA figures of your branch.

9. If at some day you feel that today Karkhana is releasing sugar payments or employees will get salary today and possibly customer can withdraw money from ATM, then at frequent intervals run menu – LADSP (LOAN DEMAND SATISFACTION PROCESS) . This will satisfy the demand raised in the loan account from the saving account of the customer and no need for waiting till day end.

10. As soon as you receive the first sascal list from the controlling office , address the technical sascal first as it will bring down the figures of your list and of course ,lesser will be the pages of sascal, lesser will be our tension.

11. Always understand Time value of money, There are many cases where we unnecessarily wait to get more money and later we lose that money also what we were previously getting. It’s the need of the hour that we cannot wait and increase the age of NPA unnecessarily. Always remember, A stitch in time saves nine.

12.  You can only exercise your power when you know what is your power ?  Modified NPA management policy and Liberal OTS schemes are now available. Be decisive, get the thorough study and utilize it fully.

13. I understand that it’s extremely difficult to initiate legal action for every NPA account. But at least Pick 2,3 strong cases and start the legal action. If it is Sarfaesi , immediately go for 13(2) , pre possession and drag it till the day of paper publication and E auction. Let there will be a fear created amongst the borrowers that we bankers can do everything when it comes to saving our mother institution. If every branch will do at least 2,3 such cases , many NPA borrowers will upgrade their account due to fear . Also publicize your action in such a manner that it will reach in the ear of each and every NPA borrower. Do less Sing more.

14.  Education loan students are very image conscious. When we go to their residence for recovery, often they will be at some other place for job. Try to take out the details of their job and company. After returning, spare some 10-15 minutes and try to figure out the company’s profile by using the social networking. If possible, try to contact them through their official email ids.It will create a fear in them of losing the job as these companies are very conscious of their images .

15. There are many customers of the branches who require regular visits and they wait till the last day and every time they come in sascal, intimate them that whatever the cost involved in the regular visits, bank will recover them from their loan account as follow up charges. Make a note of their visits,take their signature and if possible, recover them also in some cases as follow up/notice charges.

16. At last I would like to say that recovery is a long continuous effort. Focus should be on recovery not on reporting . Most of the times , efforts for the day will bear fruits in the next week and possibly credit goes to the person who will visit the borrower on that day . But that should not bother us. After all we all work for the same purpose.

Read More

This PSB is going to auction actor Sunny Deol's Juhu property to recover loan

Public sector lender Bank of Baroda (BoB) has issued a notice to Bollywood actor Sunny Deol for auctioning his villa in Mumbai’s Juhu citing non-payment of dues amounting to nearly Rs 56 crore.

In a notice published in a national newspaper on August 19, 2023, BoB said the villa will be e-auctioned on September 25 due to non-payment. As per the notice, Deol, whose real name is Ajay Singh Deol, is the borrower and guarantor of the loan and has allegedly failed to pay the amount to the bank on time.

According to the rules, a loan becomes a non-performing asset (NPA) if there is no repayment of interest and principal for a period of 90 days. Banks need to set aside money to cover likely losses from such loans and they typically auction such properties to recover the amount.

"The loan was taken for the purpose of film financing in 2016, and it is an NPA since last year December 2022," said a person familiar with the matter speaking on condition of anonymity.

An email sent to BoB for official response did not elicit any response till the time of filing this copy. Moneycontrol couldn’t immediately reach out to Deols for a comment.

The development comes in the backdrop of a recent mega release of Deol’s movie. ”Gadar 2”, starring him and Ameesha Patel, which has crossed Rs 300 crore mark at the domestic box office on August 19.

Directed by Anil Sharma, the film is a sequel to the 2001 blockbuster ”Gadar: Ek Prem Katha”. The movie, a Zee Studios production, released in theatres on August 11. In a press note, the makers claimed the film has ”soared to a remarkable all-time high for any Hindi film”, especially in territories like Punjab.

In response to a query, Sunny Deol's representative said "We are in process of resolving this issue and the issue will be resolved. We request for no further speculation on the same."

Read More

BoI expects to recover 2,500 crores of bad loans per quarter

Bank of India (BoI) has set an ambitious Rs 2,500 crore quarterly recovery target for the current fiscal year as the public sector bank looks to expand after years of stagnation. CEO AK Das said he expects the loan book to grow in double digit this year and hopes to keep slippages at an average of Rs 600 crore per quarter.

The public sector bank reported gross NPAs at 9.98% of loans as of March 2022, down from 10.46% in the quarter ended December. Das said he expects the bank's NPA to be below 8% in March 2023 due to a combination of improving bad loan recoveries and restrained fresh slippages.

"Our target is to recover Rs 2500 crore per quarter and allow only Rs 600 cr to slip so that we are in positive territory on NPAs. Until the third week of June, we have done Rs 1900 crore of recoveries so far in the first quarter," Das said.

However, a large part of the recoveries depend on the bank's cases in the National Company Law Tribunal (NCLT) in which Rs 32,000 crore out of 45,000 crore gross NPAs of the bank are awaiting progress. The bank will also sell Rs 2400 cr bad loans to the newly launched National Asset Reconstructuin Co Ltd (NARCL).

BoI is the lead lender to the debt laden Kishore Biyani promoted Future Group that owes lenders more than Rs 25,000 crore. In April it initiated insolvency proceedings against the Future group which is yet to be admitted by the National Company Law Tribunal (NCLT). Das said the bank recognised Rs 600 crore of slippages from the Future Group in the quarter ended June 2022 and has now fully provided for its exposure to the group.

Das said higher recoveries will compliment the bank's growth plans as it looks to expand its loan book with larger bets on the mid cap segment.

"This year our focus is more on mid cap segment where we can do much better. We are envisaging a 8% to 10% loan growth this fiscal which is at the system or just above. We expect to our net interest margin to be as close to 3% as possible and credit cost of max 1% because we have done a lot of proactive provisioning. Housing and retail will continue to to grow faster than the rest," Das said.

He expects corporate loans to grow this year after shrinking last year mainly due to demand from core sectors like steel and cement.

"I expect big bang growth in the construction sector which has forward and backward integrations with as many as 132 sectors which along with the government's push for infrastructure will create a multiplier effect." Das said.

Corporate demand has been muted for the bank as out of the Rs 65,000 cr sanctioned not even half has been utilised.

The bank's board has approved Rs 2500 crore of equity raising but with its capital adequacy at 17% currently, the call to raise more equity will only be taken at the end of September, Das said.

Read More

Six Indian banks sue GVK for Rs 12,114 crore: Report

Six Indian banks are reportedly suing the GVK Group for $1.5 billion or Rs 12,114 crore, according to the Times of India. The six banks include Bank of Baroda, Bank of India, Canara Bank , Icici Bank , Indian Overseas Bank, and Axis Bank.

According to the report, GVK defaulted on a $1-billion loan and a $35-million letter of credit facility given by banks in 2011, and a $160-million loan lent in 2014.

GVK Coal Developers (Singapore) and nine other GVK Group companies are being sued in the case which opens Monday.

As per the banks, GVK failed to make repayments as they fell due and failed to obtain a mining lease in the Alpha project in Queensland, Australia by December 31, 2012, which was a project milestone that had to be satisfied. The banks reportedly asked GVK in November 2020 to cancel the agreement and requested repayment. But neither GVK nor its guarantors has paid any of the sums owed, the banks claimed.

On the other hand, GVK argued that "the loans was to provide part funding for the acquisition of the Hancock companies in Australia to develop their assets — including the Alpha project — into working coal mines".

“The deterioration in the market for coal, the lack of third-party investment, legal challenges to the mining projects in the courts of Queensland, meant that very little progress was made to develop the mining assets,” GVK states. GVK states it could not obtain the mining lease owing to litigation by environmental groups but denies this was a “default”.

Read More

This Indian PSU banks' have exposure to Sintex Industries

Punjab National Bank (PNB) reported yet another scam on Thursday to the tune of Rs 1,203.26 crore. The public sector reported its exposure to Sintex Industries as “fraud”, its exposure to Sintex Industries.

“Pursuant to the applicable provisions of Sebi's Listing Obligations and Disclosure Requirements (LODR) and the bank's policy, "we inform reporting of borrowal fraud of Rs 1,203.26 crore in NPA account of Sintex Industries Ltd (SIL)," PNB said in a regulatory filing.

The fraud reporting pertains to the large corporate branch at Ahmedabad zonal office, it added.

"The fraud of Rs 1,203.26 crore is being reported by bank to RBI in the accounts of the Company (SIL). Bank has already made provisions amounting to Rs 215.21 crore, as per prescribed prudential norms," the PSU bank said in a BSE filing.

This after the stressed textile company said it defaulted on its debt repayment of Rs 49.54 crore to a total of 10 investors. Of this amount, Rs 45.84 crore is the principal amount while the remaining Rs 3.70 crore was the due interest.

Sintex Industries’ total debt stands at Rs 7,358.88 crore. According to a TOI report, the total exposure of public sector banks to Sintex could be as much as Rs 6,000 crore. The banks have already classified the Sintex account as a non-performing asset (NPA) but will now will have to make full provision for the loan within four quarters – which is a requirement account classified as fraud.

According to Brickwork Ratings, at Rs 1,203.26 crore, PNB has the highest exposure to Sintex followed by Bank of Baroda (BoB) at Rs 649 crore, it rises to Rs 949 crore if the exposure of Dena Bank and Vijaya Bank, which merged with BoB, is taken into account. Another PSU bank Union Bank of India has an exposure of Rs 621 crore, including the erstwhile Andhra Bank which was merged into Union Bank followed by Canara Bank (erstwhile Syndicate Bank) at Rs 472 crore, Exim Bank at Rs 416 crore, Punjab & Sindh Bank Rs 333 crore, Andhra Bank Rs 250 crore.

Read More

Bad bank may start with Rs 60K-crore NPAs; govt may put in Rs 10K crore

Banks are likely to move big-ticket bad loans amounting to over Rs 60,000 crore to an asset reconstruction company (ARC), which will focus on turning around non-performing assets (NPAs) and enhancing value. Banks are likely to transfer more stressed assets going forward.

The government could invest up to 50 per cent of the capital in the “bad bank” with a contribution of about Rs 9,000-10,000 crore, said sources.The ARC is expected to take up both old and new cases, bankers said.

Banking lobby group Indian Banks’ Association (IBA) is expected to take the proposal, which is on the lines of the Sashakt panel recommendations, to the finance ministry this week.

The panel had recommended that large bad loans could be resolved under an ARC. The IBA plan envisages setting up of three entities — an ARC, an asset management company (AMC), and an alternative investment fund (AIF) to acquire bad loans from banks with an aim to turn around those assets.

The ARC will acquire and aggregate the asset, the AMC will manage the assets — including takeover of management or restructuring of assets, and the AIF will raise funds and invest into securities floated by the ARC.

The proposed ARC will have to be backed by the government. A similar arrangement was done in the case of IDBI Bank where a stressed assets management fund was created, bankers added. The coronavirus pandemic is expected to result in a rise in NPAs of banks despite steps like allowing a 90-day moratorium on retail loans and relaxing working capital financing norms.

In July 2018 a committee headed by Sunil Mehta, now chairman of YES Bank, had come out with a report on resolution of stressed assets (dubbed as Sashakt panel). It recommended the formation of an independent ARC to acquire bad loans predominantly from public sector banks. The large assets with exposure above Rs 500 crore with potential for turnaround were to be managed by an AMC, while the AIF would raise funds and invest in the securities of the ARC.

The groundwork for forming such a vehicle has been done, keeping in mind the regulatory environment and conditions in financial sector. This would help to reduce response time.

According to a CARE Ratings analysis, gross non-performing assets of commercial banks declined to Rs 9 trillion in December 2019 from Rs 9.7 trillion in December 2018. Public sector banks continued to have the lion’s share (Rs 7.2 trillion in December 2019) of the total NPA pool.

State Bank of India Chairman Rajnish Kumar had said last week this is the right time for a structure along the lines of a bad bank as most banks are holding very high levels of provisioning of NPAs.

Banks have been making hefty provisions for bad loans after asset quality review kicked in 2015-16. As a consequence, the provision coverage ratio of banks has also seen an improvement from 65 per cent in December 2018 to 71.6 per cent in December 2019, reflecting an improvement in the financial health of scheduled commercial banks.

Source- Business Standard

Read More

The Co-op bank crisis: How 1,500+ urban cooperative banks are being run and regulated

The lender, with deposits in excess of Rs 11,000 crore, appears not to have adequately reported the size of its non-performing assets

Last Friday, no one turned up to deliver milk at Avillion Greenfields, a cooperative housing society in Mumbai. The delivery boys were apparently unable to withdraw enough cash from their bank to buy milk supplies.

Their savings are currently stuck at Punjab & Maharashtra Cooperative (PMC) Bank, which has been put under restrictions by the Reserve Bank of India for refusing to recognise its bad loan situation. Withdrawals from bank accounts have been restricted.

It’s not just the milk boys. Raju Agarwal, civil contractor who lives in Avillion Greenfields, has fixed deposits of nearly Rs 50 lakh in the same urban cooperative Bank. Even the two Avillion Greenfields housing societies at Jogeshwari East together have deposits of nearly Rs 3.5-crore in the crisis-hit lender. “Nearly 200 residents in our complex have deposited money in PMC Bank. And for the last few days, there has been a pall of gloom all around,” Agarwal, 57, tells ET Magazine.

The lender, with deposits in excess of Rs 11,000 crore, appears not to have adequately reported the size of its non-performing assets, especially a Rs 2,500 crore exposure to real estate company HDIL Group, which has been taken to the bankruptcy courts by creditors.

Under Lens
The plight of PMC Bank depositors across Maharashtra, Karnataka, Goa, Gujarat, Andhra Pradesh, MP and Delhi and the impunity with which its officials flouted norms raises questions about management of all 1,500-odd urban cooperative banks with total deposits of nearly Rs 4.5 lakh crore.

Urban cooperative banks are divided into two tiers based on their area of operation. While only 31% of them are in tier-2 category, they account for more than 85% of deposits and advances.

Many small cooperative banks and cooperative societies also keep their deposits in large urban cooperative banks. Agarwal says the urban cooperative banks often offer slightly higher interest rates than state-run banks and aggressively seek deposits from housing societies.

“The biggest worry is that this [crisis at PMC Bank] can have a cascading effect,” says Arvind Khaladkar, who during his time as chairman of Pune-based Janata Sahakari Bank, was credited with turning around the cooperative lender.


He says nearly 130 smaller banks have deposits at PMC Bank, and if the lender is unable to return their money, all these small banks will have to mark their deposits as NPAs. “Cooperative banks operate on thin margins and this NPA will mean they will all be in loss, triggering a wider crisis,” the retired banker told ET Magazine.

Demand for Answers
Soon after the RBI appointed an administrator for PMC Bank last Tuesday, angry depositors gathered outside different branches to get their money out. By Thursday, RBI increased the cash withdrawal limit from Rs 1,000 to Rs 10,000.

Meanwhile, several first information reports have been filed against the bank’s top management. On Friday, even as the bank’s deposed managing director Joy Thomas held a press conference in Mumbai, assuring safety of deposits, many of the depositors met near a branch in Andheri to discuss how to bring the management and the board to book.

Lending Mistakes

While all the focus is now on PMC Bank, Khaladkar refers to a larger issue — of how cooperative banks struggle to invest the funds raised as deposits and end up extending risky loans. “At one time, PMC Bank had lower deposits than Janata Sahakari. But they overtook us. When you grow fast, you need to also deploy that cash fast. That is when mistakes happen.”

The bank’s books also show a sudden spurt in term deposits. While its term deposits grew by 11.6% in FY17 and 10.96% in FY18, in FY19, the deposits jumped by 18.9%, crossing Rs 9,325 crore. Thus, the real growth in FY19 was double that of FY18. In this period, the bank’s total deposits grew by 16.89% to Rs 11,617 crore.

Former BJP MP Kirit Somaiya, who first registered a police case against PMC Bank and also met RBI deputy governor NS Vishwanathan over the issue, says: “This is a horrible situation — a clear financial fraud. The main borrower of PMC, HDIL, is already insolvent. There has to be an immediate relief for depositors and rehabilitation for the bank.”

Urban cooperative banks are caught in a time warp, he says. “They have assets like branch networks, but today when banks are going fully online, what is the value of the branches?”

The PMC Bank crisis has also broken out at a time when most cooperative banks and cooperative housing societies are rushing to hold their annual general meetings (AGM) before the September 30 deadline.

Though the AGM of PMC Bank has been postponed amid the ongoing crisis, fireworks are likely at meetings of other urban cooperative banks.

Read More

Why bad loans of public sector banks are down by 10%

1) Why is a 10% fall in bad loans significant?

Bad loans are largely loans that haven’t been repaid for 90 days or more. For the first time in years, bad loans of public sector banks have shrunk year-on-year. For years, they did not recognize bad loans, and postponed recognition by restructuring loans and also by evergreening. It was only in 2013-2014 that these banks started recognizing a few bad loans. This changed further in mid-2015, when RBI launched an asset quality review, following it up with other schemes that forced banks to recognize bad loans. That is why bad loans jumped from ₹2.27 trillion to ₹8.96 trillion between March 2014 and March 2018.

2) Why have bad loans shrunk between March 2018 and March 2019?

Loans that have been bad for four years are dropped from the balance sheet of banks by way of a write-off. This is referred to as a technical write-off and is basically an accounting practice. The central bank defines technical write-offs as bad loans that have been written off at the head office level of the bank but remain as bad loans on the books of branches and, hence, recovery efforts continue at the branch level. A lot of technical write-offs has happened between March 2018 and March 2019, leading to bad loans coming down during that period.

3) What does this mean?

As mentioned earlier, public sector banks started recognizing bad loans nearly four-five years back. In 2018-19, bad loans that had been on the balance sheets of banks for more than four years were automatically written off. The total amount of bad loans written off in 2018-19 was nearly ₹1.97 trillion. Also, the fresh bad loans recognized during the course of the year came down by 45%. This explains why the bad loans of public sector banks have come down. Time is acting as a healer. Primarily, the bad loans have been written off. Over and above this, the recognition of fresh bad loans has come down, which is good news.

4) What about the recovery of bad loans that have been written off?

Given the definition of a technical write-off, loans can be recovered even after they have been written off. Between April 2014 and March 2018, the total amount of loans written off by public sector banks was around₹3.17 trillion. Of this, around 14% was recovered previously. This doesn’t sound good. Hence, a loan, once written off, is as good as one waived off.

5) What’s the big-picture implication?

In the future, as bad loans become over four years old, more such loans will see a technical write-off. If these loans are not recovered, the centre will have to keep investing money in public sector banks to keep them going. In 2017-18 and 2018-19, it invested ₹2.06 trillion. If rates of recovery of loans written off do not improve, a lot more money will be needed to keep recapitalizing these banks.

Read More

Banks has No powers to use Bouncers to Recover Loans

No one has any power to appoint any musclemen or bouncers for recovery of loans forcefully,” Union Minister of State for Finance Anurag Thakur said in the Lok Sabha on Monday.

Thakur said the RBI has issued ‘Guidelines on Fair Practices Code for Lenders’ which are required to be adopted by banks, duly approved by their Board.

“The said circular prohibits lenders from resorting to undue harassment in recovering loans, viz., persistently bothering borrowers at odd hours, use of muscle power for recovery of loans etc,” he said.

The minister said with regard to complaints, the RBI has informed that complaints received by it regarding violation of the said guidelines and abusive practices followed by banks’ recovery agents are viewed seriously.

“In such cases, the RBI can consider banning the bank concerned from engaging recovery agents in a particular area for a specified period.

“In case of persistent breach of above guidelines, the RBI can also consider extending the period or the area where the bank concerned is barred from engaging recovery agents,” he said.

Read More

Public sector banks recover Rs 1.2 lakh cr from bad loans in 2018-19

Public sector banks (PSBs) have recovered close to Rs 1.2 lakh crore from stressed assets during the financial ended March, primarily helped by resolution under the Insolvency and Bankruptcy Code (IBC), an official said. During the first half of the previous fiscal, banks recovered Rs 60,713 crore from bad loans. "Due to non-resolution of some big accounts referred under NCLT (National Company Law Tribunal), PSBs could not achieve the resolution target of Rs 1.80 lakh crore. But, these accounts should be resolved in the current financial year," the official said.

Banks recovered close to Rs 55,000 crore from the NCLT resolution, the official said. "Compared to Rs 74,562 crore in 2017-18, the recovery in the previous financial year nearly doubled to Rs 1.2 lakh crore," the official said.

Two large accounts of Essar Steel and Bhushan Power & Steel Ltd are still pending to be resolved. It is expected that these two accounts should be resolved in the next few months and recoveries from these could be around Rs 50,000 crore. JSW Steel had revised its offer from Rs 11,000 crore to Rs 18,000 crore and later to over Rs 19,000 crore, whereas Tata Steel's last offer was at Rs 17,000 crore after it had refused to revise its bid. ArcelorMittal has made a bid of Rs 42,000 crore for Essar Steel.

According to the official, consolidation among public sector banks and higher recoveries by state-owned lenders will be on the government's agenda in the current financial year. Referring to the liquidity crisis in the non-banking financial companies (NBFCs), the official said that there are issues with both solvency and liquidity in these companies.

Read More

This bank with worst asset quality is waging a war on bad loans

IDBI Bank, the lender with India’s worst bad-loan ratio, is seeking to curtail its soured debt by selling Rs 100 billion ($1.4 billion) of stressed assets and stepping up efforts to recover dues from delinquent borrowers. 

“We have set up a war room to focus on recovering the non-performing loans while another team is keeping a check on loans showing early signs of stress,” Chief Executive Officer Rakesh Sharma said by phone. The lender wants to sell stressed loans “by June-end to quicken the pace of clean-up exercise”. 

Burdened with the world’s worst bad-loan ratio, Indian lenders are stepping up efforts to recover delinquent debt after the Reserve Bank of India announced tougher rules. The Mumbai-based lender’s turnaround efforts gathered pace after Life Insurance Corporation of India, the nation’s largest insurer, bought a controlling stake from Prime Minister Narendra Modi’s government. 

The insurer has infused more than Rs 210 billion into IDBI to bolster its risk buffers and bring it out of the regulator’s emergency programme that restricts lending. 

IDBI Bank will emerge from the Reserve Bank’s prompt corrective action framework by September as the bad-loan ratio narrows and profits rise, Sharma said. Banks sanctioned by the regulator are restricted from lending and expanding their network while they mend their balance sheets. IDBI’s gross bad-loan ratio stood at about 30 per cent as of December 31, an exchange filing shows. 

The lender is also planning to raise about Rs 10 billion by selling its holding in National Stock Exchange and National Stock Depository over the next month, the chief executive said on Sunday. According to Sharma, the bank will also complete the sale of its insurance and mutual fund units in 2019. 

Shares of IDBI Bank rose 4 per cent at 11 a.m. in Mumbai trading. It was the best performer on the 12-stock Nifty PSU Bank Index, which gained 2.6 per cent. 

Sharma also shared his views on the Iran payments business and capital raising. Comments in the following Q&A have been edited and condensed: 

Will IDBI consider raising capital this year? 

The bank will raise tier I and tier II capital in 2019. We will tap the public market to raise these funds and LIC will participate in that round to retain their majority stake in the bank. We would be coming into the market around September after our profit trajectory improves. 

Why is IDBI getting into the Iran oil payments business? 

Indian refiners’ payments for Iranian oil shipments were earlier handled solely by Uco Bank. Now, the government has allowed IDBI Bank also to route these payments. We are working out the processes and by March-end, we should start processing these payments. As refiners are required to deposit any money destined for Iran without interest with us, the bank’s cost of funds and borrowings will come down. 

Source- Economic Times

Read More

Large borrowers fall in line after RBI’s one-day default norm

A central bank rule mandating disclosure of loan default even if it is just by a day is putting the fear of god in big borrowers. Borrowers, who owe more than ₹5 crore, are gradually regularizing repayments following the Reserve Bank of India’s (RBI) 12 February circular asking banks to disclose any payment default.

Responding to a Right to Information (RTI) query from Mint, RBI said the total outstanding loans of borrowers, who defaulted on bank loans (under the one-day default norm), has declined more than 60% to ₹55,070 crore on 30 September 2018 from ₹1.53 trillion on 30 June. To be sure, these are not soured assets, but loans where borrowers did not pay instalments on time. However, the data also shows that one-day defaults dipped to a low of ₹50,306 crore on 31 August from ₹91,280 crore on 31 July and rose 9% in September.

"There is a clear change in borrowers’ behaviour and banks are also more alert in taking up these incidents. A message has been sent to errant borrowers that defaults would not be tolerated,” said Arijit Basu, managing director of the State Bank of India.

Large borrowers, experts say, have started paying up on time due to fears of their companies being referred to the bankruptcy court and eventually losing control of their assets.

In its circular, the central bank asked lenders to institute a board-approved policy for resolution of stressed assets. Banks were told to start the resolution process as soon as a borrower defaults on a term loan and were given 180 days to cure it, failing which the account would have to be referred to the National Company Law Tribunal (NCLT).

Under previous guidelines, lenders had the freedom to initiate the resolution process after 60 days of default.

“Earlier, only the NPA (non-performing asset) classification was taken seriously by borrowers, not defaults. That has changed as banks no longer want any stressed asset on their books and, subsequently, the amount of loans under special mention accounts (SMA) has also dropped,” said Basu. To some extent, the introduction of the Insolvency and Bankruptcy Code (IBC) had also helped, he added.

Asset quality of banks improved in Q2 FY19, with gross NPAs as a percentage of total loans declining from 11.5% in March 2018 to 10.8% in September 2018.

The one-day default norms were initially not received well by the industry and a section of lenders. So much so that in April last year, RBI deputy governor N.S. Vishwanathan explained in a speech that the revised framework tries to reduce the arbitrage borrowers are currently enjoying while raising funds through borrowing from banks, as against raising funds from the capital markets.

He had said that if a borrower delays coupon or principal payment on a corporate bond even for a day, the market would penalize the borrower heavily, but defaults in bank borrowings have not led to a similar reaction. “There is a need to change this and restore the sanctity of the debt contract, lest bank debt becomes subordinate even to equity,” he had said.

According to RBI data, the top 100 large borrowers accounted for 16% of gross loans and 21.2% of gross NPAs of banks at the end of the September quarter of FY19.

For large borrowers, the proportion of outstanding loans with any signs of stress (including SMA 0, 1, 2, restructured loans and NPAs) has come down from 30.4% in March 2018 to 25.4% in September 2018.

Some experts say the one-day default norms are hard on some borrowers, who default due to genuine business concerns.

Former RBI deputy governor S.S. Mundra said that while it is critical to keep strict timelines for monitoring credit quality, it has burdened bankers who are already pressed for time.

“In some cases, where the defaults occur owing to genuine cash flow issues, banks nonetheless have to start the resolution process, arrange meetings and look for revival plans,” Mundra said. “This has to be done each time a borrower defaults and it has to be stopped as soon as they repay, leading to an exercise that could have been avoided had there been a buffer period.”

However, the former RBI deputy governor added that not only has IBC changed the way a borrower looks at the system, but bankers also have begun timely stress assessment exercises.

Source- Livemint

Read More

PSU banks recovered large amount of bad loans in 4 years to FY18, says minister

Public sector banks recovered Rs 2.33 lakh crore worth of bad loans during the four years from financial year 2014-15 to fiscal 2017-18, Parliament was informed Friday. As per RBI data on global operations for PSBs, during the financial years 2014-15 to 2017-18, PSBs recovered Rs 2,33,339 crore, of which Rs 32,693 crore was from written-off accounts, Minister of State for Finance Shiv Pratap Shukla said in a written reply in Lok Sabha.

He was responding to a question asked on non-performing assets (NPAs) and write-offs by public sector banks (PSBs) during April 2014 to April 2018 and the amount recovered by them. Shukla said, write-offs of NPAs is a regular exercise of the banks to clean up their balance sheet, tax benefit and capital optimisation.

“Borrowers of such written-off loans continue to be liable for repayment. Recovery under relevant legal processes from written-off accounts may extend beyond the financial year in which the account is written off,” he said.

During 2014-15 to 2017-18, the PSBs witnessed reduction in their NPAs due to write-offs (including compromise) to the tune of Rs 3,16,515 crore.

Aggressive lending practices, wilful default/loan defaults as well as corruption in some cases and economic slowdown were the primary reasons for spurt in stressed assets, he further said. Country’s largest lender SBI, stood on a gross bad loans of Rs 2.02 lakh crore as on September 30, 2018, showed the data furnished by the minister which was sourced from the Reserve Bank.

Among the rest of the 20 PSBs, Punjab National Bank had grossed NPAs to the tune of Rs 80,993 crore by end of second quarter of the current fiscal, IDBI Bank Rs 50,690 crore, Bank of India Rs 50,338 crore, Union Bank of India Rs 48,575 crore.

Bank of Baroda also had NPAs to the tune of Rs 46,454 crore, Canara Bank Rs 41,907 crore, Central Bank of India Rs 37,411 crore, Indian Overseas Bank Rs 35,607 crore and UCO Bank Rs 28,822 crore.

In reply to a query on gross advances done, the minister said aggregate gross advances of PSBs increased from Rs 16.98 lakh crore as at end-March 2008 to Rs 45.91 lakh crore by the end of March 2014.

Read More

SBI and BoI seek bids for NPAs worth Rs 7,000 crore

Seven months after the Supreme Court (SC) ordered the maintenance of status quo on insolvency proceedings against manufacturing firm Jayaswal Neco Industries, State Bank of India (SBI) on Thursday sought bids from asset reconstruction companies (ARCs) for the company. The lender said it already has a bid in hand from an investor interested in buying the asset and the auction will be through the Swiss challenge method, based on the existing bid. “Besides the fund-based outstanding of Rs 1,362.89 crore at reserve price of Rs 885.89 crore, the bidder would also be required to furnish guarantee/100% cash margin for the non-fund-based outstanding to the extent of Rs 171 crore, or the non-fund-based outstanding as on the date of assignment, whichever is higher, subject to a maximum of `219 crore (non-fund-based),” SBI said in an auction notice.

 In April, the apex court had passed its order directing status quo after Jayaswal Neco pleaded that it should not have been subjected to insolvency proceedings because a majority of its lenders had agreed to a restructuring plan for the company’s debt. Jayaswal Neco owes its lenders Rs 3,522 crore and was named in the RBI’s second list of large non-performing assets (NPAs) which were to be resolved under the bankruptcy law, unless resolved by other means by mid-December.
SBI is seeking a 100% cash bid for the asset and the reserve price implies it is willing to take a haircut of up to 65%.
The bank has also put on sale two other bad-loan accounts — Ahmedabad-based Sona Alloys (Rs 648 crore) and MCL Global Steel (Rs 100 crore). For Sona Alloys, it will entertain bids that offer a mix of cash payments and security receipts (SRs), with haircuts ranging between 70% for a full-cash offer and 62% for a bid paying 25% in cash and the rest through SRs. For MCL Global, only full-cash bids will be accepted, with the haircut capped at 68%.

Bank of India (BoI) also invited bids for 44 NPA accounts worth a total Rs 4,703 crore on Thursday. The accounts include Dighi Port (Rs 273 crore), Lavasa (Rs 328 crore), Sona Alloys (Rs 23.45 crore) and Visa Steel (Rs 67 crore). Visa Steel, too, is a second-list account.  BoI has earlier made multiple attempts to palm off some of these accounts such as Lavasa, Visa Steel and Jyoti Power during the last few months.

BoI’s recoveries from sale of bad assets during the September quarter did not match its expectations. Dinabandhu Mohapatra, MD and chief executive officer, BoI, said, “We have recovered around Rs 282 crore during this quarter and that process will continue through Q3 and Q4 also. We have identified accounts worth `10,000 crore for sale, from which we are expecting good recoveries.”

Read More

4 PSU banks put up NPAs worth over Rs 7,500cr for sale

At least four large public sector banks have put up nearly Rs 7,500 crore worth of non-performing assets (NPAs) on sale to asset reconstruction companies (ARCs) and other financial institutions.

Lenders including State Bank of India (SBI), Bank of Baroda, Dena Bank and Andhra Bank have decided to sell a large part of their NPA exposures to accounts which are undergoing resolutions at various insolvency courts.

“We expect to recover a large part of these assets on a cash basis. This also helps us avoid delays in resolution due to the excessive litigation,” said the head of a large public sector bank.

On November 20, Bank of Baroda listed 35 bad loan accounts worth Rs 4,237 crore for sale on its website. These include: Jindal India Thermal Power (Rs 334.93 crore), Rathi Steel & Power (Rs 290.52 crore) and Rolta India (Rs 287.38 crore).

“The interested ARCs/ banks/ NBFCs/FIs can conduct due diligence of these assets with immediate effect after submitting expression of interest and executing a non-disclosure agreement with the Bank,” BoB said on its website.

Similarly, state-owned Andhra Bank has invited bids for the proposed sale of its NPAs comprising 53 accounts, with a principal balance of Rs 1,552.96 crore on a cash basis only. The e-bidding will take place on December 3. The bank will execute the assignment agreements and fund transfer on or before December 10.

Another government-owned lender Dena Bank proposed sale of 84 NPAs, with an outstanding exposure of Rs 3,324 crore, to be sold through an e-bidding process on November 29. The country’s largest lender SBI had also put up 11 bad loan accounts for sale to ARCs and financial companies to recover dues worth nearly Rs 1,019 crore.

Price still pinches

“Banks are putting up many distressed assets on sale, but pricing continues to be an issue. However, with more cash deals and push for a clean-up from the regulator has helped us garner a better price. They (banks) also want to avoid the NCLT (National Company Law Tribunal) after the Reserve Bank of India’s (RBI) February 12 circular. Hence, they are putting up more assets on sale,” said a chief of a large ARC.

The circular mandates all lenders to push all borrower accounts for resolution under the Insolvency & Bankruptcy Code (IBC) if a successful recovery has not been made within 180 days of the loan turning into an NPA.

Banks and ARCs have been negotiating hard over the past several years. Given the rush to recover loans and increasing supply of bad loans, banks are willing to take more hair-cuts or losses on its loans than before for immediate cash recovery.

Asset Reconstruction Company (India), or Arcil, one of the country's largest ARCs, plans to buy about Rs 5,400 crore worth of stressed assets from banks. For this, it plans to raise additional Rs 1,500 crore in the next six months.

In FY18, Arcil acquired about Rs 2,700 crore worth of assets, while the same for the industry stood at over Rs 20,000 crore, said Pramod Gupta, Arcil’s Chief Financial Officer (CFO).

With a clear focus on retail and mid-sized distressed assets, Arcil's CEO and Managing Director Vinayak Bahuguna said his firm is selectively looking at some of the industrial assets too. “In the mid-sized segment, we are looking at companies with debt up to Rs 5,000 crore. We are looking at steel, textile and road projects and some select stressed power projects.”

In Q2, Bank of India had put up a total of Rs 10,000 crore worth of NPAs on sale through auction. The bank’s CEO and MD Dinabandhu Mohapatra said the management is negotiating resolutions for power assets worth Rs 3,000 crore. Till March, cumulative estimates suggest that about one-third of the bad loans of banks have been purchased by ARCs.

As on September, banks are sitting on a huge pile of NPAs worth over Rs 10.50 lakh crore on its balance sheets, creating an opportunity for ARCs and domestic and foreign investors.

Read More

IBC resolve large amount of NPA, Banks recover more than half of their money

Creditors have recovered Rs 49,783 crore, or almost 56% of their admitted claims, from 32 stressed companies where insolvency resolution plans were approved by the National Company Law Tribunal (NCLT) by the end of June, showed data compiled by the insolvency regulator.

Despite the average 44% haircut that the creditors in general had to take in these cases, analysts said the Insolvency and Bankruptcy Code (IBC) has performed much better than the earlier system where the recovery process was strenuous and yielded too little. Of course, the headline numbers are good primarily because of Bhushan Steel, which accounted for close to 64% of the total claims by these 32 firms and an equal amount in recovery.

Financial creditors, such as banks, have managed to recover Rs 47,768 crore, or a little over 55% of their claims, showed the data by the Insolvency and Bankruptcy Board of India, compiled on the basis of the inputs provided by resolution professionals (RPs). Operational creditors — including raw material suppliers — have received Rs 2,015 crore, making up for 61% of their claims.

Financial creditors, expectedly, made up for the bulk (96%) of the total claims admitted by RPs. “The IBC is way better than the earlier system, where recovery used to take a lot of time, and wherever a one-time settlement took place, the amount was usually not more than 20-30%. Also, many stressed firms were allowed debt restructuring, which further worsened their state of health. In contrast, the IBC stipulates a time-bound resolution of default cases, which is good,” said Manoj Kumar, partner and head (M&A and insolvency resolution services) at consultancy Corporate Professionals Capital.

However, analysts said the ratio may change for the worse in the coming weeks once the resolution process of some of the large stressed companies such as Bhushan Power and Steel, Lanco Infratech and Alok Industries are factored in, as haircuts in these cases are expected to be much higher. For instance, against the admitted claims worth Rs 47,000 crore by financial creditors, the highest offer (by JSW Steel) is only Rs 19,350 crore. Lanco Infra, with Rs 45,263 crore in debt from financial creditors, is feared to be heading for liquidation as the lenders have reportedly rejected an offer. In case of Alok Industries, against the debt of Rs 29,500 crore, Reliance and JM Financial have placed a joint bid of only Rs 5,050 crore.

Nevertheless, once these old cases — where chances of a grand turnaround without massive investments are remote — are settled and new cases come in, recovery would be much higher, a senior government official said. This is because creditors can invoke insolvency proceedings against defaulting firms very early when chances of turning them around would be much higher and easier.

Interestingly, in nine of these 32 cases, insolvency proceedings were triggered by the corporate debtors themselves, while 14 were by financial creditors and nine by operational creditors. As many as 12 cases were handled by the NCLT’s Kolkata bench, and eight by the Mumbai bench.

Source- Financial Express

Read More