SBI plans Rs 5,000 cr in NPA sales to ARCs

SBI plans Rs 5,000 cr  in NPA sales to ARCs

India's premier lender State Bank of India is all set to bring down its bad assets by offloading about Rs 5,000 crore of its total dud assets valued at Rs 67,799 crore to asset restructuring companies (ARCs) before the end of the current fiscal.

SBI had reported 5.73 per cent of its assets as bad loans in the quarter ended December 31, 2013.  The move to bring down its dud assets by SBI comes ahead of the tighter provisioning norms kicking in from next April, which the Reserve Bank of India (RBI) had announced in May last year by more than doubling the provisioning for restructured loans to 5 per cent from two per cent.

A SBI top official said the bank has invited many of the 14 ARCs functioning currently "to pick up our stressed loans of over Rs 5,000 crore and we will be definitely offloading at least a large portion of this to the highest bidders. The process should be concluded before the end of the month”.

Earlier this month, SBI chief Arundhati Bhattacharya had stated in Kolkata that "the bank is considering a proposal to sell NPAs in the current quarter. This would be the first time we would be selling NPAs to asset reconstruction companies or ARCs”. But she did not specify how much the bank was planning to offload then.

ARCs typically pay 5-10 per cent of bad loans being bought in cash and the rest could be security receipts (SRs), the SBI official pointed out.

In the quarter to December alone, SBI had added as much as Rs 11,400 crore in fresh bad loans or 5.73 per cent, taking its overall NPA mount to a whopping Rs 67,799 crore. This pulled down its net profit by a whopping 34 per cent to Rs Rs 2,234 crore, as the bank was forced to make Rs 3,428.6 crore towards loan provisions up from Rs 2,766 crore a year ago.

Further, the bank added Rs 11,400 crore in fresh slippages, including Rs 9,500 crore from SMEs and mid-corporates and added Rs 6,165 crore into its restructured loan book during the quarter, while a clean-up of its balance-sheet resulted in writeoff of around Rs 5,000 crore in the third quarter. 

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