SBI puts Rs 230-crore NPAs up to sale, stares at haircuts up to 79%

The State Bank of India put four non-performing assets (NPAs) worth Rs 230 crore on the block on a 100 percent cash basis, and prices imply that the bank may be staring at haircuts of up to 79 percent, The Financial Express reported.

These assets are Lovely International and Lovely Enterprises, which is worth Rs 95 crore, Abhijeet Ferrotech worth Rs 89 crore, Trichy Tanjavur Expressway worth Rs 24 crore and Madurai Tuticorin Expressway worth Rs 22 crore. Reserve prices of these accounts indicate that the public sector bank is ready for 79 percent, 63 percent, 48 percent and 43 percent haircut respectively.

The bank released a statement saying, "Besides the amount outstanding under any disbursed loans, the bank shall notify the purchaser details of any undevolved letters of credit (LCs) or bank guarantees (BGs) yet to be invoked/instalments of deferred payment guarantees (DPGs), which are not yet due, in respect of the NPA accounts being offered for sale by the Bank."

The report said that SBI will retain a “pari-passu” charge on securities related to uncrystallised non-funded facilities. After the sale, these facilities will be converted to funded exposure and sold by SBI to the same buyers who are interested in funded facilities currently.

Bad loan accounts put on the block by SBI crossed Rs 27,000 crore in Q4FY19 as lenders hurried for recoveries before the financial year ended.

Other large exposures by banks on sale include Bank of Baroda and IDBI Bank's exposure to Reliance Communications (RCom) at Rs 1,838 crore and Rs 1,056 crore respectively. The lenders are also trying to free their balance sheets of Bhushan Power & Steel and Alok Industries. These entities are still slugging in and out of the IBC court.

Asset reconstruction companies (ARCs) were buying cash-based NPAs throughout the previous financial year, but industry experts reckon that the demand has slowed down since Q4. Union Bank CEO Rajkiran Rai G said that the bank didn't see much interest in the last quarter and it was analysing the market for sales.