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THE ECONOMIC TIMES
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23.10.07
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| As real estate booms, Indian Bank drives hard bargain with ARCs |
INDIAN BANK, which is negotiating the country's biggest sale of bad
loans, says it is not satisfied with the terms offered so far
by asset reconstruction companies (ARCs) and is bargaining for
a better deal in line with the sharply higher prices of real
estate pledged with it as security.
"In most of the old cases, the value of collateral security
is increasing. So, whenever we try to sell them, the borrowers
come running for a one-time settlement," bank executive director
A Subramanian said, adding that it would continue efforts to
recover bad loans until it is offered a good deal by ARCs.
The 100-year-old bank has invited bids to sell bad loans worth
about Rs 1,700 crore. It had gross non-performing assets (NPAs)
of Rs 515.56 crore at the end of September and Rs 1200 crore
of loans which it has written off. In the biggest transaction
of its kind, ICICI Bank sold over Rs 1,300 crore of bad loans
to Standard Chartered in 2005. "With our own efforts, we recovered
over Rs 650 crore last year. We expect to do well this year,"
he said. Indian Bank recovered Rs 653.50 crore in 2006-07, compared
to Rs 418.20 crore a year earlier and Rs 311.58 crore in 2004-05.
Its gross and net NPAs have come down to 1.85% and 0.35% at
end of March 2007.
Yet, about ten years ago Indian Bank faced the largest ever
losses in the country's banking history because of imprudent
lending. It had to be bailed out by the government, which issued
recapitalisation bonds of over Rs 3,800 crore. In 2002, the
government passed a law that gave banks greater power to recover
loans from defaulters and also led to formation of ARCs. In
the first half of this fiscal Indian Bank has made recoveries
of Rs 188.67 crore. "Some more big ticket recoveries are in
the pipeline," Mr Subramanian said. Six specialised branches
are now operating to recover high-value NPAs.
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