Allahabad Bank to sell 540 crore worth NPAs

State-owned Allahabad Bank on Tuesday said it was in the process of selling its distress assets worth Rs 540 crore to an asset reconstruction company. The bank also said it was targeting an overall growth of 18% in the coming fiscal.

Due to a high non-performing assets (NPA) ratio and increase in provisioning, the bank’s net profit for the September quarter fell by half to Rs 234 crore from Rs 488 crore in the same quarter a year ago. Gross NPAs stood at 2.98% as of September 2012.

“Stress is continuing because of the lag effect. This quarter will continue to feel this and there may be recovery only after that. While most of the restructuring is done, repayment would begin only down the year,” said Shubhalakshmi Panse, CMD, Allahabad Bank.

She added that the bank has set up a credit monitoring vertical to identify potential NPAs and get them upgraded. It has also appointed a general manager to enable recoveries and oversee credit management. The idea is to double the recovery target to Rs 911 crore from the current Rs 411 crore.

“With the steep targets for NPA management we are looking at shoring up the Net Interest Income, which was affected because of higher NPAs,” she said. The bank had already restructured loans aggregating Rs 12,800 crore, including Rs 5,700 crore belonging to discoms as of September 30.

Meanwhile, the bank is likely to maintain the net interest margin between 2.8% and 2.9% during this fiscal.

The bank hopes its CASA deposits will marginally increase from 30% to over 31.5% in March 2013 and to 33-34% in March 2014.

“In the next fiscal, we expect a credit growth in road projects and greenfield power projects...Overall, the growth next year should be about 18 per cent, with momentum picking up only in the second half of the fiscal,” she said.