Bank of India to focus on one-time settlement to recover bad loans
KOLKATA: Weighed down by sticky loans and net losses, the state-run Bank of India has decided to go for one-time settlements (OTS) of loans with errant borrowers as one of the key recovery strategies.
The lender with a Rs 52045-crore pile of non performing assets, is ready to take OTS route for all borrower segment, general manager SK Aggarwal told ET.
Banks are allowed to settle NPA accounts even after taking large haircuts when recovery becomes difficult and to avoid lengthy and tedious legal process.
"We have provision cover against such loans and therefore any recovery would directly add to our profitability," Aggarwal said.
Just a couple of days back, Standard Chartered Bank entered into one-time settlement with Paramount Communications for the later's entire outstanding dues.
"NPA recovery is one of the focus areas for the bank," Aggarwal said.
The Mumbai-based lender is also looking to rebalance its loan asset portfolio by growing retail lending and cutting down exposure in risky corporate loans to protect erosion in asset quality.
The bank with a retail loans share of 16% is aiming of to grow it to 18% of total loan by FY18 and to 20% by FY19, Aggarwal said.
Dinabandhu Mohapatra, the new chief executive, has instructed all zonal heads to promote retail loans, farm loans and loans to small entrepreneurs.
BoI with negative return on assets for two consecutive years and net NPA over 6% has breached the level one risk threshold and became a candidate for Reserve Bank of India's Prompt Corrective Action.
This means it will be barred from paying dividend.
The bank’s net losses narrowed to Rs 1,594 in FY17 from Rs 6,335 crore a year earlier.
The lender with a Rs 52045-crore pile of non performing assets, is ready to take OTS route for all borrower segment, general manager SK Aggarwal told ET.
Banks are allowed to settle NPA accounts even after taking large haircuts when recovery becomes difficult and to avoid lengthy and tedious legal process.
"We have provision cover against such loans and therefore any recovery would directly add to our profitability," Aggarwal said.
Just a couple of days back, Standard Chartered Bank entered into one-time settlement with Paramount Communications for the later's entire outstanding dues.
"NPA recovery is one of the focus areas for the bank," Aggarwal said.
The Mumbai-based lender is also looking to rebalance its loan asset portfolio by growing retail lending and cutting down exposure in risky corporate loans to protect erosion in asset quality.
The bank with a retail loans share of 16% is aiming of to grow it to 18% of total loan by FY18 and to 20% by FY19, Aggarwal said.
Dinabandhu Mohapatra, the new chief executive, has instructed all zonal heads to promote retail loans, farm loans and loans to small entrepreneurs.
BoI with negative return on assets for two consecutive years and net NPA over 6% has breached the level one risk threshold and became a candidate for Reserve Bank of India's Prompt Corrective Action.
This means it will be barred from paying dividend.
The bank’s net losses narrowed to Rs 1,594 in FY17 from Rs 6,335 crore a year earlier.