By the end of March Bank of Maharashtra will offload non-performing loans worth ₹400-500 crore to asset reconstruction companies (ARCs), a top bank official has said.
“We are exploring this possibility (sale to ARCs) now that the norms have been modified to ensure a balanced environment for ARCs and banks”, RK Gupta, Executive Director, told BusinessLine .
The regulatory framework for securitisation companies had been recently modified to stipulate that ARCs will have to mandatorily invest and hold 15 per cent of the security receipt (SR) in place of a limit of 5 per cent earlier. This will have an immediate beneficial impact on cash-flows for banks, which will receive 15 per cent of the value of the sale.
So far this fiscal, Bank of Maharashtra has not offloaded any of its non-performing loans (NPLs) to ARCs.
Seeking improvement Gupta said the bank is looking to improve the NPA situation and its planned sale of bad loans is part of the bank’s NPA management strategy.
As of end December 2014, the bank’s gross NPAs as a percentage of advances stood at 6.65 per cent. The net NPA level stood at 4.7 per cent.
Gupta said the bank is not looking to raise any capital in March, which is the only remaining month this fiscal. “We have a comfortable capital adequacy ratio at 11.7 per cent”, he added.
The bank had recently raised additional tier-1 capital of ₹1,000 crore through seven-year perpetual bonds with a coupon of 9.48 per cent a year.