A senior SBI official said: "We have showcased bad loans of about Rs 2,400 crore in the first quarter and have sold a part of it. It was mostly corporate accounts."
Banks have showcased bad loans to the tune of Rs 30,000 crore Asset Reconstruction Companies (ARCs) during April-June as lenders strive to clean up their balance-sheet by selling debt at a deep discount.
Banks are in a hurry to make good of the Reserve Bank of India (RBI) regulation that allows them to write off losses in eight quarters instead of bad loans impacting the balance-sheet immediately.
A senior SBI official said: "We have showcased bad loans of about Rs 2,400 crore in the first quarter and have sold a part of it. It was mostly corporate accounts."
Siby Antony, chief executive officer and managing director at Edelweiss Asset Reconstruction Company, a leading private ARC, said, "Though a large number of loans were showcased, the sales were only about 10% and it was skewed only to one or two players. Banks are now allowed to write off losses over eight quarters and this leeway comes to an end by March 2016."
A senior PNB official said, "Bad loans will continue for a few quarters. Most infrastructure loans are still stressed. We are trying to sell bad loans wherever possible."
The central bank has now allowed commercial banks to spread losses on the sale of bad loans to ARCs up to March 2016.According to existing norms, if the sale of bad loans to ARCs are at a price below the net book value (which is the book value minus the provisions held), then the shortfall could be debited to the profit and loss (P&L) account over the two-year period, subject to necessary disclosures.
RBI's financial stability report released on June 25 says that NPAs increased to 4.5-4.6% in March from 4.5% in September last year. It adds that it will further rise to 4.8% in September this year and the decline to 4.7% by end of the current financial year (March 2016).
The RBI report showed that five sectors — mining, iron & steel, textiles, infrastructure and aviation — that together constituted 24.8% of the total advances of commercial banks, has a share of 51.1% in the total stressed advances.
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