Canara Bank May Tap Arc To Rid Npas

The Bangalore-based Canara Bank is exploring various options, including tapping the asset reconstruction company (ARC) route, to rid its balance sheet of sticky assets.

"For tackling the non-performing assets (NPAs) the legal machinery needs to be energised. In this regard implementation of the bankruptcy and foreclosure laws will aid the commercial banks in effecting recoveries," R V Shastri, chairman and managing director of Canara Bank said.

Bankruptcy and foreclosure legislation, which are awaiting Parliament clearance, will enable lenders to make recoveries without lengthy legal procedures.

Pending legal reforms the bank could resort to the ARC route, the debt recovery tribunals and the normal legal procedure for cleansing the balance sheet, he added.

 

"Our bank is comfortable on the NPA front. Gross NPAs of the bank stands at 8.25 per cent of the total advances (Rs 2,400 crore) while the net NPAs is pegged at 5 per cent of total advances (Rs 1,600 crore)," Shastri pointed out.

On the general interest rates prevailing in the economy, he said the soft interest rate bias is expected to continue for quiet sometime.

"With the government stepping up spending on the infrastructure sector, the economic fortunes of the country are expected to improve from second half of the next financial year," Shastri said.

The bank expects to aggressively step up lending to the retail sector (housing, consumer loans etc) from Rs 200 crore a month as of now to Rs 500 crore a month from next financial year.

"The bank has thus far lent Rs 1,000 crore to the retail sector this year. Overall, the bank will end the year will a retail disbursement of about Rs 1,600 crore," the CMD said.

Canara Bank, which has an equity base of Rs 578 crore, plans to come out with an initial public offer in August. It plans to raise Rs 225 to Rs 250 crore at a reasonable premium.