SBI to sell Rs 230-crore NPAs with up to 79% haircut

State Bank of India (SBI) on Tuesday put on sale four non-performing assets (NPAs) worth Rs 230 crore on a 100% cash basis, with reserve prices implying haircuts of up to 79% for the accounts.

The four assets are Lovely International and Lovely Enterprises (Rs 95 crore), Abhijeet Ferrotech (Rs 89 crore), Trichy Tanjavur Expressway (Rs 24 crore) and Madurai Tuticorin Expressway (Rs 22 crore). The reserve prices for the four accounts suggest that the haircuts SBI is prepared to take stand at 79%, 63%, 48% and 43% respectively.

“Besides the amount outstandingunder any disbursed loans, bank shall notify the purchaser details of any un-devolved LCs (letters of credit)/ BGs (bank guarantees) yet to be invoked/ installments of DPGs (deferred payment guarantees), which are not yet due, in respect of the NPA accounts being offered for sale by the Bank,” SBI said in a bid document.

The bank shall retain pari-passu charge on the securities relating to uncrystallised non-funded facilities. In case of crystallisation of non-funded facilities after the sale, that portion will be converted to funded exposure and sold by SBI to the same buyer who buys the funded exposures currently on sale.

Bad loan accounts put on sale by banks in the March quarter of FY19 rose to over Rs 27,000 crore as lenders hastened to book cash recoveries ahead of the end of the financial year 2018-19, according to sale documents put up by banks. Delays in resolution through the Insolvency and Bankruptcy Code route may have also forced banks’ hand.

Among the large exposures on the block in Q4 were Bank of Baroda (BoB) and IDBI Bank’s exposures to Reliance Communications (RCom) — Rs 1,838 crore and Rs 1,056 crore respectively. The other large accounts banks are trying to palm off are those of Bhushan Power & Steel and Alok Industries. These two are yet to be fully resolved in the insolvency courts and banks’ provisioning burden against them shot up to 10% in the March quarter.

While the market for cash-based NPA sales to asset reconstruction companies (ARCs) was robust through most of FY19, bankers spoke of a slackening in Q4. For instance, Union Bank of India sold bad loans worth `700 crore in FY19, though only Rs 38 crore of this came in the fourth quarter. Rajkiran Rai G, managing director and chief executive officer, Union Bank, told reporters: “Last quarter, we didn’t see much interest. Now we will have to gauge the market again for sales.”