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For Indian Overseas Bank, the prospect of recovering Rs 107 crore from a written-off bad loan (of Prakruti Infrastructure) in the current quarter, comes at an opportune time. For, the recovery would soften the blow of the additional Rs 165 crore of provision for bad debts the bank would have to make for April-June, on account of the revised provisioning norms.
The RBI recently raised the provisioning requirement across debt categories. For instance, the provisioning for loans where interest is overdue for over 90 days has been raised by 5 percentage points to 15 per cent. Similarly, for bad loans not backed by collateral, the provision requirement has been raised by 5 percentage points to 25 per cent.
Mr M. Narendra, Chairman and Managing Director, IOB, told Business Line on Wednesday that the bank would have make a provision of Rs 145 crore for bad loans and Rs 20 crore for restructured assets.
Sour accounts
IOB has been in the grip of delinquent loans in the last couple of years, mainly because of a few accounts of the real estate industry having gone sour.
The bank reduced its total bad loans to Rs 3,089 crore as on March 31, 2011, from Rs 3,611 crore the previous year. However, the bank could have shown better performance on bad loans front if it were not for fresh slippage of Rs 873 crore during the fourth quarter of 2010-11.
One of the headache accounts was that of Prakruti Infrastructure, but thankfully the borrower is repaying the loan. The Rs 107-crore expected to come in the current quarter will soften the blow on account of the higher provisioning, says Mr A. P. Singh, General Manager-Recovery, IOB.
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