Punjab National Bank, the second-largest public sector lender, has received loan restructuring requests worth Rs 12,000 crore out of the 40,000 crore it had anticipated on account of stress due to the Covid-19 pandemic on businesses and individuals, the bank’s Managing Director Mallikarjuna Rao said.
Out of the total restructuring requests, restructuring sought for corporate loans has been worth Rs 9,000 crore, and these have been invoked as on December 31. The process of restructuring will be completed in the current quarter, Rao said.
In August last year, the RBI had announced a one-time restructuring for personal and corporate borrowers impacted by the Covid-19 pandemic.
“Restructuring requests have not been as we were expecting,” Rao said.
One of the reasons is that retail borrowers availed moratorium, and did not feel the need to restructure loans.
Rao said that PNB has retained its gross NPA (non-performing assets) ratio guidance at below 14 per cent and net NPA at 5 per cent by March-end.
The bank has not classified any account as a bad loan which was not an NPA as on August 31, 2020, based on the Supreme Court’s blanket ban on fresh recognition of soured loans. However, the lender has made a contingent provision of Rs 2,520 crore for such accounts that were not classified as NPA. If the bank would have classified such accounts as NPA, the lender’s gross NPA and net NPA ratio would have been 14.71 per cent and 5.65 per cent, respectively, PNB said while announcing its October-December earnings Friday.
“While the challenge has been there for Q3, though Supreme Court judgement is a holding back on (the) identification of NPA, but January appears to be much better in terms of the collections,” he said.ALSO READ: PNB net profit declines 18% QoQ to Rs 506 crore in December quarter
‘Expecting Rs 8000 crores in cash recoveries’
Recoveries have been better in January, Rao said, and the bank is expecting cash recovery of Rs 3,800 crore from the resolution of Bhushan Power. “Good amount of recovery” is also expected from the resolution of DHFL where bidding has been concluded. These two accounts will help in achieving the target for recoveries.
“Besides NCLT, the recovery has been “moderate”, he said.
Rao also said the bank has a good amount of real estate property after amalgamation with Oriental Bank of Commerce and United Bank of India, and the bank expects to realise Rs 500 crore by selling non-core assets by June 2021.
Bad Bank
Setting up a bad bank will not require high capital initially, Rao said. The bad bank will not be required to purchase any assets, and assets will just be transferred by the banks, an exercise which will not need high capital.
The capital requirement would be to the extent of 10-15 per cent of cash that will have to be given to banks. The remaining will be in the form of security receipts
Setting up of a bad bank will help buyers in acquiring assets at one-go where many banks are involved in a consortium, Rao said.
Bidders currently face problems with participating in bids from various banks in a consortium. Now bidders will get to transparently bid for assets and acquire them in totality, he added.
