Facing deadline heat, banks sell over 50% bad loans to ARCs in last 2 weeks of FY17

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26 Aug, 2025 12:21

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In a bid to meet the clean up deadline, banks managed to sell over 50 percent of their bad loans worth Rs 35,000-40,000 crore to asset reconstruction companies (ARCs) in the last two weeks of FY17.

About half of Rs 70,000 crore worth of assets have been sold to ARCs which have paid about Rs 18,000 crore for the sales. Bulk of it has come in during last month, especially in the last two weeks. A majority of the asset sales was seen coming from the private sector banks including ICICI Bank, Axis Bank and IDFC Bank, said two people aware of the development.

After the asset quality review (AQR) exercise conducted in the second half of calendar year 2015, banks were pushed to recognise potential non-performing loans.

This, under the aegis of former Reserve Bank of India Governor Raghuram Rajan, was done in order to clean up the banks’ balance sheets by March 2017.

A chief of an ARC said, “Banks are coming forward and selling more now as they will now have to require more provisions towards the bad loans. So far, half of Rs 70,000 crore have been sold and banks are willing to negotiate on the pricing as well.”

According to the ARC chief, about Rs 18,000 crore have been paid by ARCs for the total sales made so far.

Echoing similar numbers, another ARC head said, “About Rs 30,000-35,000 crore have been sold this year and we will see more sales going forward.”

In FY17, the ARCs issued a total of Rs 15,000 crore worth of security receipts and the rest in cash.

Reports suggest that Edelweiss ARC bought almost two-thirds of the NPAs worth about Rs 22,000 crore. JM Financial ARC and Phoenix ARC bought Rs 4,800 crore and Rs 4,200 crore, respectively.

ICICI Bank and Axis Bank sold the maximum at about Rs 5,000-6,000 crore of loans each, while IDFC Bank sold about Rs 4,000 crore.

Other banks including South Indian Bank sold Rs 2,000 crore while HDFC Bank sales stood under Rs 1,000 crore.

In the April monetary policy meet, RBI also allowed minimum capital to be infused into ARCs from Rs 2 crore to Rs 100 crore to drive more cash sales.

Many ARCs including Edelweiss, International ARC and others are looking at raising more capital to facilitate higher cash sales, which is preferred by banks.