Allahabad Bank may sell Rs 540-cr bad loans in Q4

In a bid to improve performance in asset quality and margins, Allahabad Bank will sell Rs 540 crore worth of non-performing assets ( NPAs) to asset reconstruction companies. The process is currently on and will be completed during the current quarter, said Shubhalakshmi Panse, chairperson and managing director of Allahabad Bank.

According to Panse, the bank has adopted a three-pronged strategy to rein in NPAs. This includes appointing a general manager to look after the credit management, doubling the recovery target from Rs 411 crore to Rs 911 crore, and offloading a part of the Rs 2,300-crore NPAs.

It may be recalled that the bank's net profit for the second quarter ending September, 2012 declined to Rs 234 crore from Rs 488 crore in the corresponding quarter last year as it had to made more provisions against NPAs in addition to the decline in net interest income and the net interest margins. The gross NPAs went up to 2.98 per cent.

The bank chief said she hoped to see better performance in the December quarter compared with the previous quarter on the back of reduction in NPAs and recovery in certain economic sectors including SMEs, manufacturing and retail. However, she maintained that the stress on the asset quality would continue this quarter due to the lag effect of last year though uptake in credit growth had been visible.

The recovery was coming from MSME, manufacturing, retail and services sectors while the infrastructure sector led by power and road projects were also getting implemented, she said. As on September 30, 2012, the bank had taken up restructuring of Rs 12,800 crore loan portfolio, which includes Rs 5,700 crore loans of discoms. Further corporate debt restructuring was on the anvil during the current quarter, she said.