State-owned Punjab National Bank (PNB) has increased its bad-loan recovery target to Rs 25,000 crore for the current financial year. This marks more than a 50% increase over the Rs 16,000 crore that it recovered in 2018-19.
The Delhi-headquartered lender expects to recover around a quarter of the sum (Rs 6,000 crore) from two large corporate accounts -- Essar Steel Ltd and Bhushan Power & Steel Ltd. Both steelmakers are currently in the final stages of resolution under the Insolvency and Bankruptcy Code (IBC).
“Apart from these two accounts, we are expecting recoveries through various other efforts,” PNB managing director and chief executive officer Sunil Mehta said in a media interaction.
LV Prabhakar, executive director at PNB, said the lender had analysed its portfolio to explore recoveries from avenues such as Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act) and one-time settlement (OTS) in addition to the Insolvency and Bankruptcy Code.
“Last year, we had identified 2.25 lakh accounts for recoveries under the OTS scheme. Some of these instalments are still coming through and this year we will expand the scope of these accounts to loans up to Rs 50 crore from which we expect recoveries,” Prabhakar added.
PNB has set up a stressed assets management vertical with four general managers under it to handle resolution and restructuring, monitoring, and two GMs to look after recovery of assets below Rs 50 crore and above Rs 50 crore, respectively.
In all, PNB had recovered bad loans worth Rs 16,000 crore in the financial year 2018-19. A quarter of this came from accounts undergoing insolvency, Rs 6,300 crore via OTS and Rs 1,500 crore was realised through the sale of assets to asset reconstruction companies (ARCs). The recovery amount stood at Rs 5,617 crore in 2017-18.
The development comes amid reports that PNB is looking merge with two or three government-owned banks that could include Oriental Bank Of Commerce, Andhra Bank and Allahabad Bank as the re-elected Modi government presses ahead with banking reforms.
The state-owned bank is also looking to raise Rs 10,000 crore in 2019-20 from the sale of non-core assets, a rights issue/qualified institutional placement (QIP) and write-backs from two large accounts undergoing insolvency proceedings.
"We are expecting Rs 1,000 crore from sale of non-core assets, Rs 4,000 crore write-back from two accounts (Essar Steel and Bhushan Power and Steel) and Rs 5,000 crore will be raised from the market," said CEO Mehta. “We are expecting to raise funds from the market in the second half of the year, maybe the third quarter.”
The bank expects to raise Rs 600 crore from the sale of its erstwhile headquarters, situated at Bhikaji Cama Place in South Delhi, to the income tax department. The deal has been in the works for a few months and is currently in the final stages of completion.
It is also planning to raise Rs 400 crore by selling some smaller real estate assets.
PNB had announced its earnings earlier this week, posting a lower net loss of Rs 4,750 crore during the fourth quarter of 2018-19 as against Rs 13,417 crore in the year-ago period
While the bad loans on its books remained high, PNB’s gross non-performing assets (NPAs) improved to 15.50% from 18.38% at the end of March 2018. Net NPAs also reduced to 6.56% from 11.24%.