Utkarsh Small Finance Bank Limited has informed the sale of NPA and written-off loans to ARC
UTKARSHBNK · price
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Utkarsh Small Finance Bank has approved the sale of stressed microfinance (MFI) loans to an Asset Reconstruction Company (ARC) through two pools. Pool 1 has an aggregate principal outstanding of approximately Rs. 1,016.24 crore with a reserve price of Rs. 133.10 crore. Pool 2 has a principal outstanding of approximately Rs. 474.75 crore with a reserve price of Rs. 62.19 crore. The combined outstanding is around Rs. 1,491 crore being offered at a total reserve price of Rs. 195.29 crore (roughly 13% recovery). The sale will be executed via cash and security receipts. The bank has begun inviting Expressions of Interest (EOI) from potential buyers.
This is a routine bad-loan cleanup exercise. While the bank will take a significant haircut (~87% on the principal), offloading these stressed MFI assets should improve its asset quality ratios and free up capital and provisions that were tied up in these non-performing loans. Shareholders should view this as a positive step toward balance sheet cleaning, though the steep discount reflects the poor quality of the underlying microfinance portfolio.