SBI to hold online auction of Rs12,500 cr of repossessed property

The State Bank of India will hold a record online auction this weekend to sell repossessed flats, warehouses and offices worth a total of nearly Rs12,50 crore, the state-owned lender announced today.

India's biggest bank aims to cut down its Rs62,500 crore worth of bad debts or 'non-performing assets' with this move.

The SBI auction will be the biggest nationwide online sale to date, seeking to auction off distressed loans. It comes weeks ahead of rule changes that will force banks to take on much larger provisions for such loans, with what were previously labelled as restructured debts being reclassified in accounts as bad debt.

Including both bad and restructured debt, more than a tenth of Indian bank loans have soured. India Ratings and Research, part of the Fitch agency, estimates impaired loans could hit 13 per cent of the total by March next year.

"We are now a lot more aggressive," said Parveen Kumar Malhotra, who leads a special unit at SBI for managing stressed assets.
With a reduction in government's budgetary support and the propose raising of capital from the market yet to fructify, banks are in dire need of cash.

The government has decided to infuse Rs6,990 crore in nine PSBs during 2014-15 against the Rs14,000 crore infused in 14 PSBs during 2013-14. Finance minister Arun Jaitley wants banks to raise fresh capital from the market.

SBI had gross non-performing assets (NPAs) of 4.9 per cent of total loans and net NPAs of 2.8 per cent as of 31 December. While the bank has been successful in arresting the build-up of bad loans in the past four quarters, recoveries and upgrades have been slow. In the January to March quarter last year, the bank saw recovery and upgrade worth Rs8,443 crore, which dropped to Rs667 crore in the October-December period.

Fresh slippages, or new loans turning bad, which were at Rs7,947 crore in the March 2014 quarter was also lower at Rs7,043 crore in the three months ended 31 December.