Bank may sign deal with ARC

The Central Bank of India has said it will sign a deal with an asset reconstruction company (ARC) to sell non-performing assets worth Rs 300 crore. It may be noted that the bank had earlier said it is evaluating bids from ARCs to sell NPAs worth Rs 400 crore. The bank also said the Lok Adalat model has been successful in recovering bad personal loans and other dues.

Speaking to reporters on the sidelines of a seminar on reverse mortgage loans organised by the Central Bank of India and Consumers Association of India in Chennai, S Sridhar, chairman and managing director (CMD), said, “We will sign a deal to sell our NPAs worth Rs 300 crore in a week’s time.”

He added, the bank has also taken up a recovery drive for NPAs, both for larger (industrial NPAs) and small loans. He noted, “the average industrial NPA size is around Rs 15-20 crore.”

For small loans the bank has taken the Lok Adalat route for recovery. “The Lok Adalat has been organised to settle credit-related matters for small loans.

The bank disposed of 226 cases and recover a whopping Rs 11.2 crore on a single day. A total of 1,430 cases had originally been listed for hearing.

Earlier, speaking on reverse mortgage, Sridhar, who is also chairman of the National Housing Bank (NHB) said, NHB is planning to make a representation to the finance ministry to exempt the reverse mortgage-enabled annuity schemes (RMLEA) from Income Tax.

The bank also asked the state governments for guaranteed insurance schemes to expand RMLEA to people who come under government housing projects.

RMLEA was launched in December 2009 and it was an improved version of the old scheme, which was launched in 2007. The new version will have an annuity linked scheme and the member will get annuity for life time, compared to 20 years cap on the old scheme.

He narrated, in the earlier scheme there was cap of 20 years, which was felt very small by the customers. On the other hand banks could not take the risk on the ones’ life expectancy, which can taken only by the insurer.

Under the scheme, the bank would transfer the loan fund after setting aside of the margin, to the insurance company, which would pay a monthly annuity to the customer.

“This is the only product, which has been approved the Insurance Regulatory and Development Authority.”

To increase the penetration of the new scheme, NHB has sought more bankers to join the initiative along with an insurance partner, said Sridhar.

“To give boost the penetration, government should exempt annuity payment to the customer from income tax,” said Sridhar. He added, the bank is planning to take the matter with the finance ministry.

He also said to expand this initiative to government aided housing projects beneficiaries, the state governments should come forward to cover the risk by sponsoring an insurance scheme, said Sridhar.