RBI tightens NPA sale norms: How will it impact banks

Written By Unknown on Kamis, 07 Agustus 2014 | 10.56

The central bank has said that ARCs will now have to invest and hold minimum 15 percent security receipts as against 5 percent held earlier

In a bid to tackle non performing asset (NPA) situation plaguing the banking system, the Reserve Bank of India has tightened norms for the sale of bad loans to asset reconstruction companies (ARCs).

The central bank has said that ARCs will now have to invest and hold minimum 15 percent security receipts as against 5 percent held earlier. Also, the planning time for NPA realisation has been cut to 6 months from 12 months currently.

Sharing views on revised norms, P Rudran, MD & CEO, Asset Reconstruction Company of India (ARCIL) said this move will result in better discipline from banks and ARCs.  Initially, he expects to see reduction in loans bought by ARCs.

He further added that according to the new rules, the management fees will be calculated based on the value of the NAV.

Meanwhile, VR Iyer, CMD,  Bank of India said that the public sector lender has sold about Rs 4,500 crore of loans to ARCs in the past one year. BoI doesn't expect any sale in this quarter, but may optr for selling Rs 400-500 crore worth of bad loans to ARCs post Q3, she added.  

Transcript to follow shortly

Bank of India stock price

On August 07, 2014, at 09:25 hrs Bank Of India was quoting at Rs 275.05, up Rs 1.20, or 0.44 percent. The 52-week high of the share was Rs 356.75 and the 52-week low was Rs 126.95.


The company's trailing 12-month (TTM) EPS was at Rs 39.98 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 6.88. The latest book value of the company is Rs 465.37 per share. At current value, the price-to-book value of the company is 0.59.


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