IDBI Bank puts NPAs worth around Rs 970 cr on sale

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Industrial Development Bank of India (IDBI Bank Limited or IDBI Bank) has put non-performing asset which worth around 970 crores on sale last month. The assets include the lender’s exposure to 17 smaller loan accounts from the housing loan and loan against property (LAP), KSK Mahanadi Power Company, and two smaller corporate loans.

The NPA relates to loans, advances of a financial institution. As long as the asset fails to generate the expected income, it becomes NPA. In other words, an asset becomes NPA when it ceases to generate income, dues for more than 90 days.

The gross principal amount outstanding in the housing and loan against property accounts is Rs 47.78 crore and they are being offered at a reserve price of Rs. 27 crore on an all-cash basis to asset reconstruction companies (ARCs) and other financial entities. The lending (loan) to two Bhubaneswar-based companies, Raipur Power & Steel and Parth Concast is provided at a total reserve price of Rs 77.57 crore together.

Industrial Development Bank of India is also in the process of selling its potential exposure to KSK Mahanadi, which is currently undergoing the corporate insolvency resolution process. While the exact amount of the KSK Mahanadi exposure on sale could not be known, IDBI Bank has admitted claims worth Rs 843 crore from the company. The bank last month decided to extend the last date for submission of bids for this asset, now the last date of submission of bids by December 10, 2020. The bank has extended the date upon the special request from a few interested buyers.

According to an analyst, banks have managed to put a lid on fresh slippages in the last two quarters, this could turn out to be a temporary phenomenon. Emkay Global Financial Services in a recent note said that most banks and non-bank lenders have guided for better growth and asset quality outlook than earlier expected which, coupled with sector rotation and flows, which led to a sharp rally in stocks. Though earlier indicators were positive, sustaining growth/collection momentum, particularly in retail/SME (small and medium enterprises), will be key to further re-rating. Industrial Development Banks’ commercial banking operations are divided into two areas corporate banking and retail banking.

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