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.

Reference:- https://economictimes.indiatimes.com/industry/banking/finance/banking/allahabad-bank-dials-rbi-for-transfer-of-bad-loan-from-hong-kong/articleshow/67963366.cms?from=mdr

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