Central Bank to slash NPAs to 1%

Central Bank of India is drawing up plans to reduce its gross non-performing assets (NPAs) to 1 per cent from the current 8.4 per cent, in the next two to three years. It will use a combination of sale of NPAs, recoveries and prevention of fresh slippages, to reduce the gross NPA level.

The bank's gross NPAs stood at Rs 2,630 crore, which is 8.4 per cent of advances, as on September 30, 2005. Which is significantly higher than average 5.5 per cent for public sector banks.

The Mumbai-based bank is closely monitoring recoveries and slippages. It made recoveries of Rs 175 crore in the first half of 2005-06. Fresh additions to NPAs during the first half was Rs 236 crore, Central Bank chairperson and managing director, H A Daruwalla, said.

The bank has made extensive use of provisions of the Securitisation Act to deal with defaulters. It issued 4,452 notices involving an amount of Rs 1,841.54 crore and also took possession of assets in 516 cases amounting Rs 201.30 crore in 2004-05. The bank recovered Rs 140.69 crore from 1,609 cases during 2004-05.

The bank is considering selling a part of its impaired loans to asset reconstruction companies. Before selling assets, the bank has to write-off those loans through provisionings, and this could act as a drag on profit, she said.