In a strategy aimed at maximising recovery from stressed assets, Jammu & Kashmir Bank has called for counter bids from entities such as asset reconstruction companies and other banks to see if they can better the ₹285-crore offer it has received for the sale of its ₹568-crore term loan exposure to Essar Steel.

The bid offer, possibly put in by an asset reconstruction company (ARC), received by the private sector bank is about 50 per cent of its total loan exposure to Essar Steel, which is undergoing corporate insolvency resolution process.

The bank, in which the Jammu & Kashmir (J&K) state government has majority stake (about 59 per cent), is selling its exposure to the steel maker on 100 per cent cash basis.

J&K Bank is using the counter bids route to get a recovery offer that is higher than the one it has already received.

This sale of Essar Steel loan is expected to help the bank bring down its bad loans, which increased by ₹2,321 crore in the first nine months of the current financial.

The Essar loan facility is secured by a first pari-passu (equal footing) charge on all present and future fixed assets of the borrower, including all land available with the borrower; and a second pari-passu charge on all present and future current assets of the borrower.

In the last couple of years, banks such as Axis Bank, Indian Overseas Bank, ICICI Bank, HDFC Bank and Federal Bank have sold their Essar Steel loan exposure to Edelweiss ARC Company. The steel-maker has defaulted on loans amounting to about ₹47,000 crore.

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