SBI be­gins process to sell Rs1,580 crore of bad loans

Mint ST - - CORPORATE - BY ALEKH AR­CHANA alekh.a@livemint.com MUM­BAI

State Bank of In­dia (SBI) has ini­ti­ated the process of sell­ing Rs1,580 crore of bad loans to fi­nan­cial in­sti­tu­tions, in­clud­ing as­set re­con­struc­tion com­pa­nies (ARCS).

The bank has put on block 11 non-per­form­ing as­sets (NPA) for sale through a bid­ding process, ac­cord­ing to a ten­der on the bank’s web­site.

“Right now, in­ter­ested par­ties are con­duct­ing due dili­gence. Once that is com­pleted, the bid­ding process will take place later this month,” a per­son in the know said on con­di­tion of anonymity. Last month, the coun­try’s largest lender put Rs3,554 crore of bad loans up for sale. In that auc­tion, it re­ceived bids only for a por­tion of the to­tal; SBI is await­ing fi­nal ap­provals to go ahead with the sale, said a sec­ond per­son, who also re­quested anonymity.

In the first half of fis­cal 2018, the bank man­aged to sell Rs763 crore of bad loans to ARCS.

“ARC sale has not been sig­nif­i­cant in these (first) two quar­ters. I think now, with the in­sol­vency and bank­ruptcy code in the pic­ture, the whole strat­egy, par­tic­u­larly around cor­po­rate cases, more and more prob­a­bly get re­ferred to the NCLT (Na­tional Com­pany Law Tri­bunal),” SBI chair­man Ra­jnish Ku­mar said in an earn­ings call on 10 Novem­ber. “But any large or mid-sized cor­po­rate, we be­lieve we will be able to han­dle it bet­ter than ARC.”

Ku­mar said SBI sells as­sets only when it is able to get an in­tended price.

Ac­cord­ing to ex­perts, most banks are seek­ing all-cash deals or those with higher cash com­po­nent in case of a sale to ARCS. This is be­cause from the be­gin­ning of this fis­cal, if a bank in­vests in more than 50% of se­cu­rity re­ceipts cre­ated against the sale of its own stressed as­sets, it has to set aside more money as pro­vi­sion. From 2018-19, this thresh­old of 50% will be re­duced to 10%.

Given the thin cap­i­tal level of ARCS, and their greater fo­cus on turn­around of ac­counts, in­clud­ing those un­der NCLT, most NPA sale deals are stuck un­der the 15:85 rule. Here, ARCS pay 15% of the net as­set value as up­front cash and is­sue se­cu­rity re­ceipts to cover the rest of the amount.

HE­MANT MISHRA/MINT

SBI chair­man Ra­jnish Ku­mar.

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