In a decisive move to strengthen its balance sheet and accelerate recovery, Indian Overseas Bank (IOB) has engaged an external advisor for the first time to facilitate the sale of over Rs 12,224 crore worth of non-performing assets (NPAs). The bank has appointed Navi Mumbai-based Special Situation Advisors India to identify buyers for 67 large corporate accounts, many of which are entangled in litigation or liquidation proceedings.
Key developments in the resolution strategy
1. Strategic advisor engagement
- Special Situation Advisors India beat out competitors including Deloitte, EY, and BoB Capital Markets by quoting a nominal fee of 11 paise per Rs 1 crore recovered
- The advisor will work within a four-month window to scout buyers across the debt ecosystem, including aggregators and asset reconstruction companies (ARCs)
- This marks IOB’s first use of a process advisor to consolidate and market distressed assets
2. Portfolio composition and exposure
- The 67 accounts include high-profile defaulters such as Videocon Industries, Frost International, Rotomac Global, Lanco Infratech, and ABG Shipyard
- IOB’s exposure in these accounts is typically less than 10 percent of the total banking exposure, making them ideal for debt aggregation and resale
- The total outstanding exposure across these accounts exceeds Rs 12,224 crore
3. Auction and sale process
- The bank has invited expressions of interest from ARCs for the sale of 46 NPA accounts worth Rs 11,500 crore
- An e-auction is scheduled for January 30, 2025, with bids to be submitted on a full cash basis
- The reserve price has been set at Rs 2,290 crore, and the due diligence window runs from January 10 to January 28
4. Asset quality and recovery focus
- IOB’s gross NPA ratio has dropped significantly from 11.69 percent in March 2021 to 2.72 percent as of September 2024
- Net NPAs have also declined from 3.58 percent to 0.47 percent over the same period
- The bank is actively considering the sale of MSME and educational loan portfolios to further improve asset quality
5. Broader recovery strategy
- The bank’s approach includes SARFAESI actions, compromise settlements, and strategic sales to ARCs
- Many of the accounts are financed under consortium arrangements and some are admitted under the National Company Law Tribunal (NCLT)
- Buyers will have the flexibility to bid for entire portfolios, individual accounts, or grouped assets
Implications for the banking sector
IOB’s aggressive push to offload bad loans signals a broader trend among public sector banks to clean up legacy stress and improve credit discipline. By outsourcing the sale process to a specialized advisor, the bank aims to maximize recovery while minimizing operational drag. The move also reflects growing confidence in India’s ARC ecosystem and its ability to absorb and restructure distressed assets.
What this means for investors and borrowers
For investors, the sale opens up opportunities to acquire distressed assets at competitive valuations, especially in sectors like infrastructure, telecom, and manufacturing. For borrowers, it may mean faster resolution timelines and renewed scrutiny of defaulted accounts. The bank’s proactive stance could also influence regulatory thinking on NPA management and ARC participation.
Bottom line
Indian Overseas Bank’s Rs 12,224 crore NPA sale is more than a cleanup—it’s a strategic reset. With a leaner balance sheet and sharper recovery tools, the bank is positioning itself for sustainable growth and improved investor confidence. The next few months will be critical in determining the success of this bold initiative.
Sources: Economic Times, Moneycontrol, BusinessWorld, Indian PSU, Elets BFSI News
