Oriental Bank of Commerce is likely to sell in this quarter bad loans worth ₹800-1,000 crore to asset reconstruction firms, S.L.Bansal, Chairman & Managing Director, has said.
This public sector bank had last resorted to sale of assets to asset reconstruction companies about three-to-four years ago.
Banks have in recent years been reluctant to sell their bad loans to ARCs, which seek to acquire them at a discount and recover the money from defaulters.
But the public sector lenders’ stance had changed recently with rising bad debts in the banking system prompting them to shed non-performing assets to ARCs.
To reduce the stress on asset quality, many banks, including Bank of India, Allahabad Bank, United Bank and UCO Bank, have resorted to sale of bad debts to ARCs.
The biggest beneficiary of banks’ move to sell some bad debts in the current fiscal could be Asset Reconstruction Company of India Ltd (Arcil), which is India’s first ARC and a dominant player in the distressed assets market.
As against acquisition of bad loans worth ₹740 crore in 2012-13, Arcil is looking to acquire assets worth ₹2,000 crore this fiscal.