Yes Bank Moves To Plan-B After ARC Proposal Hits RBI Hurdle

In the year since it was reconstructed, Yes Bank has had some success in recovering loans from troubled borrowers. But gross bad loans are still at about a fifth of the lender’s book, based on pro forma non-performing assets data released while announcing earnings for the quarter ended December.

According to disclosures by the bank, it had managed cash recoveries worth Rs 2,973 crore during April-December 2020. It has also written off loans worth Rs 8,274 crore in the first nine months of the last financial year. Earlier this month, the bank took control of Anil Ambani-owned Reliance Centre at Santacruz area in Mumbai, against a settlement of Rs 1,200 crore worth dues.

In its analyst presentation for the quarter ended June 2020, the bank had said consultants had conducted due diligence on Rs 81,000-crore worth stressed accounts and had estimated recoveries worth Rs 55,000 crore. Recoveries may reduce due to the pandemic.

According to the people cited earlier, a large portion of the bad loans included stressed corporate entities including the Ambani-owned Reliance Group firms, Zee Entertainment Enterprises Ltd., Videocon Industries, some major real estate firms, among others. Recoveries from some of these may be lower given the financial troubles faced by these groups.

Will the bank’s plan to set up an ARC help speed up or improve recoveries. Vinayak Bahuguna, former chief executive of ARCIL, India’s oldest ARC, isn’t sure it will. It isn’t clear why the bank would want to pursue an investment in an ARC, when the sale of bad loans can happen even without creating a new entity, he said.

“Maybe there’s a case to be made about the appetite of the ARC market, but the RBI also allows banks to sell assets to AIFs (alternative investment funds),” Bahuguna said. “If the bank already has investors on board who might be interested in buying assets from it, an AIF of these investors could be the buyer without the bank getting involved.”

Most Related Links :
reporterwings Governmental News Finance News

Source link

Back to top button