SBI starts off sale process of bad loans worth Rs 1,580 crore

Country's largest lender State Bank of India (SBI) has begun the process of selling Rs1,580 crore of bad loans to financial institutions, including asset reconstruction companies (ARCs). The bank would be disposing off the non-performing assets (NPAs) through a bidding process. SBI has put on block 11 non-performing assets (NPA), according to a report in Mint.

The reports states that last month the country's largest lender put Rs 3,554 crore of bad loans up for sale through auction. However, it received bids only for a portion of the total. While in the first half of fiscal 2018, the bank managed to sell Rs 763 crore of bad loans to ARCs.

In an earnings call on November 10, SBI chairman Rajnish Kumar said the bank will sell only those assets where an intended price is earned
In case of sale to ARCs, banks are seeking all-cash deals or those with higher cash component because if a bank invests in more than 50% of security receipts created against the sale of its own stressed assets, it has to set aside more money as provision.

From 2018-19, this threshold of 50% will be reduced to 10%. The proportion of cash component in the deal done with ARCs constitutes only 15 percent of net asset value upfront and security receipts consist 85 percent.