Public Banks' Endless Repeat Bad Loan Sales

Public sector banks in India faced significant challenges in the June quarter, as nearly 80% of the corporate bad loans they offered for sale were attempts to offload accounts that had been previously marketed. This indicates a persistent difficulty in finding buyers at acceptable valuations for large, legacy corporate accounts.

Indian Overseas Bank and Indian Bank were the primary institutions responsible for these repeated offerings. Together, they accounted for nearly 89% of the repeatedly offered public sector bank loans, with Indian Overseas Bank offering an entire pool of ₹19,523 crore comprising solely repeat accounts.

In stark contrast, private sector banks presented a much more efficient approach to selling distressed assets. They offered corporate and retail loans with a principal outstanding of ₹10,734 crore, of which only a minimal 3.4% involved repeat processes. This highlights a clear divergence in managing non-performing assets between public and private financial institutions.

The sale of non-performing assets (NPAs) offers banks a clean and immediate exit, potentially improving their balance sheets and market valuation. For written-off accounts, selling NPAs can boost a bank's bottom line, allowing them to meet provisioning requirements and even attract higher market premiums, often reflected in a subsequent jump in share prices.