Domestic lender IDBI Bank Ltd. is considering the sale of its bad loan book, ahead of a fast moving stake sale by the government.
The bank is internally exploring the sale of its gross non-performing asset portfolio worth Rs 23,535 crore and technically written-off accounts, as part of a one-time clean-up exercise, according to two people with direct knowledge of the matter, who spoke on the condition of anonymity.
As of Dec. 31, IDBI Bank had corporate loans worth Rs 51,986 crore under its technically written-off book. These are accounts where the bank has fully provided against the loans.
The sale will resemble what private sector peer Yes Bank Ltd. did as part of its clean-up exercise in December 2022, the people quoted above said.
After a prolonged recovery process, IDBI Bank's financial position has vastly improved. In the third quarter, the bank reported a net profit of Rs 927 crore, up 60% year-on-year. Total advances stood at Rs 1.48 lakh crore, up 17% year-on-year, while total deposits were at Rs 2.32 lakh crore, up 5% from a year ago.
The decision to clean-up the book follows a nudge from the government to clear any legacy issues on the bank's books, the first of the two people quoted above said.
IDBI Bank is hoping to clear the book within a year, according to the persons mentioned above. The sale may happen through a direct assignment of the portfolio to an asset reconstruction company or through sales in part, they said.
While the discussions are exploratory in nature, the bank's decision comes ahead of a rapidly evolving stake sale process underway. In January, the government said that it had received expressions of interest from multiple bidders, as part of the IDBI Bank divestment process. The government and Life Insurance Corp. have placed 60.72% stake in IDBI Bank on sale, under this process.
Emirates NBD, Sumitomo Mitsui Banking Corp. and Prem Watsa's Fairfax Financial are likely to have submitted EOIs, BQ Prime had reported then.
According to the people quoted above, other prospective bidders keen on the stake buy include Kotak Mahindra Bank and Federal Bank. Reuters reported on Thursday that the Reserve Bank of India is conducting its 'fit and proper' checks on potential bidders.
Queries mailed to IDBI Bank, Emirates NDB, Fairfax, Kotak Mahindra Bank and Federal Bank on Thursday, did not immediately yield responses.
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