29 August 2019: About Rs 8,000-crore worth of stressed loans, mainly from the power and manufacturing industries, are likely to be put up for sale by lenders seeking quicker recoveries — both within and outside the dedicated bankruptcy-resolution framework.
Lenders including United Bank of India, Bank of Baroda, Axis Bank, Indian Overseas Bank, Bank of Maharashtra, and Karur Vysya Bank are likely to offer loans for sale to distressed funds or asset reconstruction companies (ARCs) in the next few days, three people familiar with the matter said. A large housing finance company will also put up some of its sour loans to builders for sale.
United Bank of India has, perhaps, put up the largest chunk on the block. A total of 42 accounts with an outstanding of Rs 2,182.2 crore have been offered. The bank has invited bids from asset reconstruction companies, banks, and financial institutions. Other lenders may be looking at anything between Rs 500 crore and Rs 1,500 crore each.
“Banks can put assets for sale but the price they want should match what is offered by funds and ARCs. Banks are looking for cash settlement, but the price they expect is still higher than what funds are offering, which means deals are few and far between,” said P Rudran, former CEO at Arcil.
Other loans on sale may include those to Jindal India Thermal Power and KSK Mahanandi. Indian Overseas Bank may offer Vadraj Cement for sale, people associated with the process told ET.
Axis Bank declined to comment on the matter. Other banks did not reply to ET’s mailed queries.
“Lenders may have to take at least 50% haircut as investors are unlikely to settle for anything less,” said an executive involved in the processes. Tough negotiations are expected, with lenders seeking to get rid of sticky assets.
United Bank of India and Bank of Baroda have either called for tenders, or will soon do so.
Earlier, too, some state-owned banks, including the State Bank of India, tried to sell bad loans. The banks received very few bids, which were not remunerative.
“Some private sector lenders are in one-on-talks with distressed funds as they are negotiating private deals to sell off bad loans,” said another person, adding that retail loans are not being offered.
Bankruptcy cases are taking rather long to get resolved. About 34% of the 1,292 cases in the bankruptcy courts up to June 2019 are delayed beyond 270 days, up from 26% a year ago, and 31% in the quarter ended March, ET reported on August 16.