IDBI Bank plans to sell Rs 100-billion bad loans, exit PCA by September

IDBI Bank Ltd, the lender with India’s worst-bad loan ratio, is seeking to curtail its soured debt by selling Rs 100 billion ($1.4 billion) of stressed assets and stepping up efforts to recover dues from delinquent borrowers.

“We have set up a war room to focus on recovering the non-performing loans while another team is keeping a check on loans showing early signs of stress,” Rakesh Sharma, chief executive officer of IDBI Bank said by phone. The lender wants to sell stressed loans “by June-end to quicken the pace of clean-up exercise.”

Indian lenders burdened with the world’s worst bad-loan ratio are stepping up effort to recover delinquent debt after the Reserve Bank of India announced tougher rules. The Mumbai-based lender’s turn-around efforts gathered pace after Life Insurance Corp. of India, the nation’s largest insurer, bought a controlling stake in the bank from Prime Minister Narendra Modi’s government. The insurer has infused more than 210 billion rupees into IDBI to bolster its risk buffers and bring it out of the regulator’s emergency program that restricts lending.

IDBI Bank will be out of the Reserve Bank’s prompt corrective action framework by September as bad-loan ratio narrows and profits rise, Sharma said. Banks sanctioned by the regulator are restricted from lending and expanding their network while they mend their balance sheets. IDBI’s gross bad loan ratio stood at about 30 percent as of Dec. 31, exchange filing shows.

The lender is also planning to raise about 10 billion rupees by selling its holding in National Stock Exchange and National Stock Depository Ltd. over the next month, the chief executive said on Sunday. According to Sharma the bank will also complete its sale of insurance and mutual fund units in 2019.