IndusInd looks to sell Rs 1.5k crore microfinance NPAs – Times of India

MUMBAI: IndusInd Bank has decided to auction Rs 1,573 crore of non-performing microfinance loans in a bid to clean up its balance sheet. The bank has set a reserve price of Rs 85 crore, indicating that it has written down nearly 95% of the value of these loans.
Meanwhile, IndusInd Bank promoters – IndusInd International Holdings (IIHL) and IndusInd (IL) – on Thursday said they have pledged an additional 2.78% of the bank’s shares worth Rs 2,000 crore. This brings the total percentage of the bank’s share capital pledged by the promoters to 6.86%. The shares were pledged on Dec 20, 2024, in favour of Barclays Bank and Deutsche Bank AG, London branch. The reason for the encumbrance is to top-up the security placed with the lenders for an existing loan facility.
Ashok Hinduja, director of the Hinduja Group, had stated that IndusInd International Holdings has received RBI approval to raise its stake in the bank to 26%. IIHL had also won the bid to acquire Reliance Capital under the insolvency route, for which it is raising funds.
Bankers said that recovery prospects in MFI loans that have gone into default are low given that these are unsecured loans. Given the small size of the loans, legal proceedings are not justified.
In the bank’s Q2 earnings call, MD & CEO Sumant Kathpalia had mentioned that the bank was shrinking its microfinance book due to stress in the sector and the increased risk weightage introduced by RBI. He added that the MFI exposure had reduced the capital adequacy following RBI’s increase in risk weights on microfinance loans from 75% to 125%. Of total advances of Rs 1.9 lakh crore, IndusInd Bank’s microfinance portfolio stood at Rs 32,723 crore – accounting for a 9% share of its loan book.
“Our disbursements in Q1 were around Rs 8,500 crore, and in Q2, they stood at Rs 7,050 crore, against our average run rate of around Rs 12,000-13,000 crore. As a consequence, our book ran down because the repayments are coming in higher than disbursements,” Kathpalia said. He added that while disbursements were expected to improve in the current quarter, they would still be lower than the disbursement potential, as the bank was watchful of developments in the industry.
In its investor presentation, the bank had stated that gross non-performing assets stood at Rs 2,259 crore, up from Rs 1,988 crore at the end of the first quarter. The NPAs in the microfinance sector at the end of the first half accounted for 42% of total gross NPAs of Rs 5,356 crore.