Allahabad Bank dials RBI for transfer of bad loan from Hong Kong
The
Economics Times
February 12, 2019
Atmadip Ray
Kolkata: State-run Allahabad Bank has sought Reserve Bank of India’s permission to
transfer the bad loans in its Hong Kong branch into the Indian balance sheet
even as it is looking to sell down the good assets to other lenders. The
transfer and offloading of assets is necessary
as the lender is in the process of winding up its lone overseas branch in Hong Kong.
The
transfer of NPAs is taking more time than expected as this needs the regulator’s
approval. The bank is, by all probability, set to miss the
March deadline set by the government for winding up the branch. The government owns
83% in the bank.
“We
are in talks with RBI to finalise the mechanism (for transfer of bad loans).
This will happen only after March,” managing director SS Mallikarjuna Rao said.
The branch has about Rs 4700 crore of standard loans while the bad loan
amounted to Rs 30-40 crore. Hong Kong does not have any asset reconstruction
mechanism.
The
Kolkata-based lender has Rs 15000 core overseas business at the end of March
last year which has now shrunk to about Rs 5200 crore, bank officials said. Of
this, Rs 460 crore is deposits. The winding up of the branch will help the bank
improve the capital-to-risk-weighted assets ratio
and boost profitability, which is as part of its effort to exit the crippling Prompt
Corrective Action framework of RBI.
Rao
expressed hope that the bank would meet most of the critical parameters to get
out of PCA June. The lender's gross non-performing assets ratio slipped to
17.8% from 17.53% a quarter back, while net NPA was at 7.7% at the end of
December, improved from 7.96%
sequentially.
Uco
Bank, which is also under PCA, has taken a similar step by rationalizing its
branches in Hong and Singapore. Uco had two branches each in these countries
which are now merged into one each to preserve capital, managing director AK
Goel said.
These
lenders have also stepped up their recoveries and directed their lending to the
retail segment. Bank of Mararashtra, Bank of India and Oriental Bank of
Commerce are the first batch of banks to come out of PCA recently, while eight
others are still facing the crippling rule.
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