Banks rapped for NPA sale at lower prices

The Reserve Bank of India (RBI) today rapped banks for selling non-performing assets (NPAs) at prices below the value of securities available.

"It has come to the notice that in some cases NPAs have been sold for much less than the value of available securities and no justification has been given,'' said the central bank in a notification. 

UNDER THE SCANNER Non-performing assets of commercial banks
Year	Gross NPAs		Net NPAs
	Amount Rs crore	As % of gross advances	Amount Rs crore	As % of net advances
2002-03	68,717	8.80	29,692	4.00
2003-04	64,785	7.20	24,396	2.80
2004-05	58,300	5.20	21,441	2.00
2004-05#	59,373	5.20	21,754	2.00
2005-06	51,816	3.30	18,529	1.20
# Including the impact of conversion of a non-banking entity into a banking entity

The banking regulator has directed banks, to work out the net present value of the estimated cash flows associated with the realisable value of the available securities net of the cost of realisation. The sale price of the asset should generally not be lower than the net present value arrived at.

In the instances of compromise settlements as the payment of the compromise amount may be in instalments, the net present value of the settlement amount should be calculated and this amount should generally not be less than the net present value of the realisable value of securities.