21 March 2019: Cash recoveries made by 20 public-sector banks (PSBs) in the December quarter of FY19 were lower than the amount of loans written off by them during the quarter, data compiled by FE show.
The clutch of banks together recovered Rs 35,058 crore during Q3 while writing off loans worth Rs 44,998 crore over the same period. This was even as recoveries rose 37% over Q3FY18 and 15% over Q2FY19. The fact that there were no large non-performing assets (NPAs) resolved through the insolvency route during the December quarter restricted banks’ recoveries.
Fifteen of the 20 banks recovered less than they wrote off in the third quarter, with the difference being the largest for Central Bank of India, which recovered Rs 465 crore and wrote off loans worth Rs 4,069 crore in Q3. The March quarter may turn out to be a better one for Central Bank as it hopes to recover around Rs 2,500 crore from the sale of its exposures to Essar Steel (Rs 424 crore), Bhushan Power & Steel (Rs 1,550 crore), Alok Industries (Rs 1,251 crore), Bombay Rayon Fashions (Rs 96 crore) and Burnpur Cement (Rs 51 crore).
With Rs 221 crore recovered against write-offs worth Rs 1,211 crore, United Bank of India also saw a wide mismatch between the two categories.
Both Central Bank and United Bank remain under the Reserve Bank of India’s (RBI) prompt corrective action (PCA) framework.
On the other hand, Andhra Bank recovered Rs 503 crore, significantly more than the Rs 55 crore it wrote-off during the December quarter. IDBI Bank – also under PCA restrictions – recovered Rs 3,586 crore in the quarter. The value of its written-off accounts stood at Rs 562 crore.
The government had set a recovery target of Rs 1.8 lakh crore for PSBs in FY19. Senior officials at the finance ministry and public-sector bankers held a meeting on Monday to take stock of recoveries from stressed assets, mainly through the Insolvency and Bankruptcy Code (IBC).
Resolution in the Essar Steel and Alok Industries accounts in the March quarter may help PSBs meet their target for the full year.
The other significant channel banks have been turning to for recoveries is sales to asset reconstruction companies (ARCs). Bad-loan accounts put up for sale by banks so far in the March quarter have risen to over Rs 27,700 crore as lenders rush to make cash recoveries ahead of the close of the financial year 2018-19. In their anxiety to close out deals, they have been willing to take fairly large haircuts in exchange for full-cash payments.