Financial Daily from THE HINDU group of publications
Tuesday, May 13, 2003

Port Info

Group Sites

Home Page - Financial Institutions
Money & Banking - Non-Performing Assets

IFCI finalises big NPA recovery proposal

Sarbajeet K. Sen


ONE of the largest single-lender clean-up operations in the financial sector is to commence soon with IFCI Ltd having finalised plans for a twin-track assault on its non-performing assets (NPAs) through its own asset reconstruction company (ARC) - Asset Care Enterprise Ltd (ACE).

According to the plan, part of the NPAs would be transferred through ACE to a special purpose vehicle (SPV) at fair market value after locating investors for the assets. These assets would subsequently be jointly resolved either by IFCI or ACE along with the joint venture partners and with the help of an asset management company.

The remaining NPAs would be passed on to ACE on a service-contract basis. ACE would then try to make recoveries against the payment of a fee by the parent institution.

IFCI carried an NPA baggage of Rs 3,896 crore at the end of March 31, 2002, which amounted to 22 per cent of the lending portfolio at that time.

Disclosing the recovery plans, Chairman and Managing Director, IFCI, Mr V.P. Singh, said that institution was also planning to have an incentive-linked payment structure for ACE. "The fees would be linked to the amount realised by ACE. As the realisation goes higher, the percentage of fees that would be paid to ACE would also go higher," Mr Singh said.

The plans have been formulated by IFCI after having got the tacit approval from the Government to go ahead with the clean-up exercise as part of its restructuring plans. The institution is now awaiting Reserve Bank of India's (RBI) nod by way of a licence for ACE to put the NPA recovery plan into action.

"We have already received the contributions from the equity partners of ACE. The NPA recovery and restructuring exercise would commence as soon as we get the licence from the RBI which we expect soon since the central bank has already come out with its guideline on ARCs," Mr Singh said.

Out of the Rs 5-crore paid up capital of ACE, IFCI would hold 49 per cent equity, with Punjab National Bank (PNB) holding 26 per cent, Life Insurance Corporation (LIC) 10 per cent, while the remaining 15 per cent would be shared between Tourism Finance Corporation of India (TFCI) and technical consultancy organisations floated by FIs.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Status quo in airport ground handling work till October

Ships need permission to enter UAE waters
What `price' cola drinks... !
No link between settlement and ADS issue: Infosys
IFCI finalises big NPA recovery proposal
Shell gets licence to open retail outlets

The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | Home |

Copyright 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line