Sidbi wants to rev up distressed assets market

Having notched up record disbursements, Small Industries Development Bank of India (Sidbi) is now turning its attention to revving up action in the distressed assets market.

India SME Asset Reconstruction Company (ISARC), the asset reconstruction firm co-promoted by Sidbi, has initiated talks with IDBI Bank’s Stressed Asset Stabilisation Fund (SASF) and state finance corporations (SFCs) to take over distressed assets. Apart from Sidbi, Life Insurance Corporation, Bank of Baroda, United Bank of India and Sidbi Venture Capital are the other shareholders of the company.

While Sidbi Chairman and Managing Director R M Malla refused to discuss specific assets, he said that the idea was to take over assets related to small and medium enterprises and restructure them along with the promoters.

But ISARC sources said that the company is looking to acquire nearly a tenth of the Rs 6,100-crore distressed IDBI Bank assets which were transferred to SASF. In addition, around Rs 1,500 crore worth of assets would be acquired from state finance corporations. The assets are expected to be acquired at 20-25 per cent of their value.

So far, Asset Reconstruction Corporation of India (Arcil) has been the dominant player in the business. But, in recent years, companies such as UTI, Reliance Capital and JM Financial have entered the segment. With the economic downturn, the level of non-performing assets (NPAs) is expected to go up significantly.

“NPAs of scheduled commercial banks alone were estimated at around Rs 56,500 crore at the end of March last year. If we add financial institutions, SFCs and urban co-operatives, the total amount would work out to Rs 75,000 crore,” Malla, who is also the ISARC chairman, said.

On Sidbi’s loan disbursements in 2008-09, Malla said that total flow went up by around 87 per cent to about Rs 28,000 crore, as against Rs 15,000 crore in 2007-08. A bulk of it was through refinance, which rose 104 per cent to Rs 20,200 crore. Direct loan flow went up by over 50 per cent to Rs 7,800 crore. Within refinance, there micro-credit outstanding rose from Rs 950 crore in 2007-08 to Rs 2,050 crore during the last financial year, representing an increase of over 115 per cent.

Besides, Malla said that there was a jump in the loans offered through the credit guarantee trust, with the number of such loans rising to 1,50,000 at the end of March this year, as against 97,000 at the end of 2007-08.