Arcil settles Rs 1741 cr bad loans in first half

Asset Reconstruction Co (India) Ltd (Arcil), the country's first bad loans buyer, has resolved cases of non-performing assets (NPAs) involving total dues of Rs 1,741 crore during April-September 2006.

Till September, Arcil resolved Rs 11,592 crore of NPAs from Rs 22,412 crore of NPAs acquired since it began operations.

Banks normally sell bad loans to asset reconstruction companies at around 20 per cent of the total dues.

In the first six months of 2006-07, Arcil acquired Rs 1,286 crore of NPAs and settled Rs 759 crore of NPAs for Rs 330 crore.

Arcil said it would be prudent for banks to sell their older NPAs in the next four months as otherwise 100 per cent provisioning would have to be made.

As on March 31, 2007, NPAs which are doubtful for more than three years as on March 31, 2004, will attract 100 per cent provisioning.

Of this, 75 per cent provisioning has been made by March 31, 2006 and additional provisioning of 25 per cent for three-year old NPAs as on March 31, 2004, would be required to be made as on March 31, 2007.

Besides, additional provisioning of 70 per cent will have to be made for NPAs which become doubtful for three years as on March 31, 2005, March 31, 2006, and March 31, 2007, at the end of 2006-07.

"In view of this, it seems prudent to transfer the NPAs to asset reconstruction companies and increase bottomlines," Arcil said.

Banks added fresh NPAs of over Rs 87,000 crore during the last four financial years and provided 62 per cent of net profit for NPAs during the four years.