Public sector lender Bank of India (BoI) has put on sale 50 corporate non-performing assets (NPAs) with outstanding of Rs 55.57 billion in a bid to clean up books.
The bank’s executives said the bad loans were being offered for sale on “100 per cent cash basis” only. The aim is to conclude the sale before the end of September to get the benefit of reduction in NPAs and better recoveries in the second quarter (Q2 FY19).
The Mumbai-based lender is under the Reserve Bank of India’s prompt corrective action (PCA) framework due to high rate of bad loans. PCA puts certain restrictions on lending while implementing a turnaround plan. The bank was trying to sell non-core assets and in Q2 would see better realisation of assets through sale to asset reconstruction companies (ARCs).
The bank has identified around Rs 80 billion worth of stressed assets for sale to ARCs.
The lender showed some improvement in its asset quality in absolute terms, even as the NPA percentage went up marginally owing to contraction in advances. Gross NPA in absolute terms was at Rs 606.04 billion at the end of June 2018, against Rs 623.28 billion in the March quarter. In terms of gross NPA ratio, it was at 16.66 per cent in the June quarter, against 16.58 per cent in the previous quarter.
The asset quality deteriorated in FY18, particularly in Q4 FY18, due to discontinuance of all the earlier schemes for the resolution of stressed assets leading to their slipping into NPAs. The bank witnessed Rs 39 billion worth of write-offs from its books after making full provisions against these loans, but recovery efforts in these accounts will continue, executives said. The bank has on board a non-discriminatory One-Time Settlement Scheme called ‘Mission Samaadhan’ for quick resolution of NPAs.
Rating agency Icra said the bank's profitability was expected to remain weak in FY19 on account of elevated credit provisions driven by the high level of net NPAs.The bank posted a net profit of Rs 950 million in the Q1 of FY19, against Rs 880 million in the same quarter last financial year.
The bank had a stressed assets exposure of Rs 120 billion (Rs 3.2 per cent of gross advances). They consist of stressed standard restructured advances and special mention accounts, which remained unpaid for 60-90 days as on March 31, 2018.
Given the high amount of stressed exposure, the bank's asset quality is expected to remain weak in FY2019, Icra said.