SBI to offload Rs5,000 crore of bad loans for the first time
18 March 2014
For the first time in the over two centuries of its history, the nation's largest lender, State Bank of India, which had reported 5.73 per cent of its assets as bad loans in the December quarter, aims to stem the rot by offloading around Rs5,000 crore of its Rs67,799 crore worth of bad assets to asset reconstruction companies (ARCs) before the end of the month, according to a PTI report.
The move comes ahead of the tighter provisioning norms kicking in from next April, which the central bank had in May last year announced when it had more than doubled the provisioning for restructured loans to 5 from 2 per cent.
"There are 14 ARCs functioning today, and we have invited many of them to pick up our stressed loans of around Rs5,000 crore. We will definitely be offloading at least a large portion of this to the highest bidders. The process should be concluded before the end of the month," a senior SBI official said in Mumbai today.
Earlier this month, SBI chairperson Arundhati Bhattacharya had said in Kolkata that "the bank was considering a proposal to sell NPAs in the current quarter. This would be for the first time we would be selling NPAs to or ARCs." But she did not specify how much the bank was planning to offload.
Normally ARCs pay 5-10 per cent of the total bad loans being bought in cash and the rest could be security receipts (SRs), the SBI official said, adding that the bank is confident of selling a good portion of the dud loans earmarked for offloading.
In the quarter to December alone, the lender had added as much as Rs11,400 crore or 5.73 per cent in bad loans, taking its overall NPA mount to Rs67,799 crore. This pulled down its net profit by a whopping 34 per cent to Rs2,234 crore, as the bank was forced to make a Rs3,428.6 crore bad loan provision, up from Rs2,766 crore a year ago.