Canara Bank sell 900crore bad loans to asset reconstruction companies

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By Accommodation Times News Service

State-run Canara Bank is planning to sell Rs 900crore of sticky loans to asset reconstruction companies this quarter in an effort to clean balance sheet.

This would be the third asset sale by the lender in as many quarters as it aims to bring down non-performing assets ratio to 2 per cent by March next year, Canara Bank chairman and managing director RK Dubey said.

Public sector banks are on an overdrive to recover dues from defaulters and Canara Bank’s effort is in step in this direction. Its gross NPA stood at Rs 8,159 crore at the end of June. The gross NPA ratio stood at 2.67 per cent while net NPA was 2.03 per cent of the total advances.

The bank sold Rs 600crore bad loans to ARCs in the first quarter after selling another Rs 1,300 crore off its books in the December quarter. The bank’s prime focus will however be on cash recovery which adds directly to the profit. Banks, especially the government-owned ones, are relying largely on recovery and up gradation of bad loans to boost income in the absence of big-ticket corporate loan demand as the economy is still suffering from low growth.

Growth in retail lending is making up for the absence of large loans for every bank, bankers said.

Dubey said that banks need to explore the retail lending potential more in the next couple of years as the “middle class” is set to grow exponentially.

The bank has sought Rs 500 crore from the government and is awaiting the government’s approval for raising Rs 3,000 crore from qualified institutional investors.

“We are ready with the QIP plan. If the government gives the nod now, we will raise the fund by September,” Dubey said. The bank may raise equity next fiscal through follow on public offer, he said. Dubey is slated to retire next month. The bank, which is a dominant player in south India, plans aggressive overseas expansion to increase the share of overseas business to 15 per cent of total business by the next five years. At present, its overseas operation contributed 6 per cent of its business.

Dubey said the bank has received Reserve Bank of India’s clearance for opening three branches in the UK, and one branch each in Japan, Frankfurt, Brazil and Tanzania. It has seven overseas branches at present.

 





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