The Hindu Business Line : Transfer of NPAs to Stressed Assets Fund helps IDBI skip big provisioning

IDBI will avoid Rs 750 crore of provisioning consequent to the transfer of Rs 9,000-odd crore of non-performing assets (NPAs) to the Stressed Assets Stabilisation Fund, the IDBI Chairman and Managing Director, Mr M. Damodaran, told Business Line on Monday.

In an informal chat on the sidelines of a lecture meeting organised by the Institute of Financial Management and Research (IFMR), Mr Damodaran explained the rationale behind the "unique" model of dealing with NPAs.

Under the proposed scheme, Rs 9,000-crore of NPAs will go off the books of IDBI, into the Stressed Assets Stabilisation Fund. IDBI will get in return, 20-year, non-interest bearing bonds worth the amount. The bonds will be redeemed as and when the bad loans are recovered.

Mr Damodaran pointed out that nowhere in the world has a sale of bad loan taken place at the full value of the loan. IDBI gets "100 paise per rupee."

He said that the swap ratio of the merger of IDBI and IDBI Bank would be decided next month.

Since it is a merger of two banks (now that IDBI has become a deemed bank), there is no need to go to the High Courts for approvals, Mr Damodaran noted.

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