Central Bank puts Rs 102-cr NPAs on sale

Central Bank of India has put non-performing assets (NPAs) with a total outstanding amount of Rs 102 crore on sale to clean up its balance sheet.

It is for the first time that the Mumbai-based public sector bank is offloading bad loans. The NPAs on sale cover 19 accounts from a range of sectors, though a particular sector has maximum cases, according to a senior bank official.

“It is a pilot project for us and the bank has not finalised the target for sale of NPAs in 2009-10. Based on the response, the bank would conduct such NPA sales every quarter,” the bank’s Chairman and Managing Director (CMD), S Sridhar, said.

While announcing the bank’s results for 2008-08, the CMD had said that their NPAs were huge and that recovery of bad loans would be in focus this year. The bank was open to selling loans to asset reconstruction companies (ARCs), he had said.

The bank reported a slight drop in its gross NPAs to Rs 2,317 crore at the end of March 2009 from Rs 2,350 crore a year ago. Its net NPAs rose to Rs 1,063 from Rs 1,063 crore during the period.

“We have made provisions for the last four-five years for NPA accounts in line with regulatory norms. The proceeds from the sale would help bolster our profit and loss and a part of it could be used to make provisions for fresh NPAs,” the senior bank official added.

The bank is opening asset recovery branches in different areas and using legal and non-legal methods, such as compromise and sale to a third party, for recovery.

Meanwhile, Kolakata-based United Bank of India is also contemplating an auction for 100 NPA cases.

The pace of NPA sale had slowed in the backdrop of resource scarcity due to the global financial meltdown. Bangalore-based Canara Bank has put on hold its plan to sell NPAs with a realisation value of around Rs 250 crore after lukewarm response from ARCs.

A Canara Bank official said ARCs have not shown much interest. Very few offers came in. Offers made were not attractive. There were around 65 accounts, including some small and large corporate cases, in question. The liabilities involved were about Rs 1,000 crore, he said.