In a bid to clean up its book faster and protect its balance sheet from further provisions, IDBI Bank has put on the block several large loans, including Reliance Communications (RCom) and Reliance Telecom.
According to bankers, until loans are fully written off, lenders have to make ageing provisions, which take a toll on their profits. Bloomberg reported this week that the bank may sell up to Rs 10,000 crore of bad loans in a bid to bring down its NPAs, which are currently 30 percent of its portfolio.
Banks had started classifying RCom as an NPA a year ago. Since they have to periodically make fresh provisions, a large part of the loans would have already been provided for. IDBI Bank has set a reserve price of Rs 470 crore, which is less than 45 percent of the principal outstanding amount. However, given that the bank would have already provided for a large part of the loan, a sale at even half of the outstanding amount would be positive for the bank.
In the case of Loop Mobile, IDBI Bank has chosen to invite offers under the ‘Swiss Challenge’ method. This involves the seller calling for bids from the open market based on an offer that it has already received. The original bidder will then be given an opportunity to match the highest bidder. It is not known which is the company that has made an offer for Loop Telecom.―India Finance News