BoI to sell Rs 900 cr bad loans to asset reconstruction cos

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Prolonged sluggishness in the economy has forced Bank of India to lower its margin expectation for the current fiscal to 2.90 per cent from 3 per cent earlier, a top bank official said today.

"The earlier estimate for NIM on the domestic side was at 3 per cent, but the turnaround which we thought, has not really happened. So, we are compelled to revise that to 2.90 per cent," bank's Chairperson and Managing Director Vijayalaxmi Iyer told reporters here.

However, the bank expects net interest margins on the international side improving to 1.20 per cent by March-end, while the combined NIM is likely to at 2.72 per cent.

The state-run bank is also examining to sell around Rs 900 crore worth of non-performing assets (NPAs) to asset reconstruction companies in the current quarter.

"We have been doing it (sale of NPAs) in last two quarters, and we are examining at it even in this quarter also. We have to crystallise on the amount...It may be Rs 800-900 crore in Q4," Iyer said.

She said the bank had auctioned Rs 2,000 crore of NPAs in Q2 and Q3, but only about Rs 627 crore was taken of from the gross NPA level.

Iyer added the bank was not likely to take any hit by selling the NPAs to ARCs.

"In the first two quarters when we have sold NPAs, we have sold them above the net book value and have not taken any haircut. We have got the excess provisioning which has been put aside and we can use it if are are compel to sell them less than the book value in this quarter," Iyer said.

When asked whether she will take stern action against wilful defaulter, including change in management, Iyer said the bank has been conveying this to defaulters.

"Naturally, we have been telling the defaulter. In fact, we have also been sounding them very often that we will be compelled to go in for (change in management)...," she said.

"In a couple of cases we have already started doing along with the other consortium bankers. Depending upon the success of that, it is easier said than done, and a lot of work is involved like getting the right person for manning the project and lot of monitoring is involved. We will test few cases and then we will go strong on them,"

Iyer said.

She said the bank will issue Basel-III compliant tier-I bonds as soon as it gets some clarifications on certain issues by the RBI and the bank is prepared to issue the bonds as soon as it gets go ahead from the RBI.

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