Union Bank of India Auctions Non-performing Assets to Recover 75% Outstanding Amount
The Union Bank of India has taken a crucial step towards recuperating its non-performing assets (NPAs) by inviting expressions of interest (EoIs) for the acquisition of bad loans totaling ?23.16 billion. The bank expects this move to help recover over ?17.5 billion, which accounts for approximately 75% of the principal outstanding. The auction date has been scheduled for August 23, providing bidders with an opportunity to bid on these distressed assets.
EoIs Invited from Various Entities before August 22
To maximize participation, the Union Bank has invited EoIs from a wide range of entities including asset reconstruction companies (ARCs), banks, non-banking financial companies (NBFCs), financial institutions, and alternative investment funds. Interested parties have until August 22 to submit their EoIs to the bank.
Highest Bidder to be Declared through E-Auction
Binding bids will be submitted through an e-auction process. Following the completion of the e-auction, the highest bidder will be declared the winner and announced immediately after.
Swiss Challenge Auction Introduced for Multiple Bids
In cases where multiple bids have been received for a particular account during the e-auction, the bank has introduced a Swiss challenge auction model. This additional step aims to encourage transparency and competition among bidders. The Swiss challenge auction is set to take place on August 31.
Noteworthy Accounts in the Auction
Several large accounts will be up for auction, including Leo Meridian Infra Projects which has an outstanding amount of ?2.64 billion, Sahara Hospitality with ?2.62 billion, and Panduranga Energy Systems with ?2.30 billion.
Accounts Unsold in Previous Auction also Available
Bidders will also have the opportunity to consider accounts that were not sold in a previous auction held in June. This presents a chance for potential buyers who may have missed out on the previous opportunity or who identified these unsold accounts as suitable assets for their portfolio.
Union Bank’s Progress in NPA Reduction
In the first quarter of FY25, Union Bank of India reported a 4% sequential decline in gross NPAs, which amounted to ?414.23 billion. Additionally, the bank recorded a 12.1% reduction in net NPAs, indicating a positive trend in its efforts to efficiently manage its distressed assets. As such, the current auction event aligns with the bank’s ongoing endeavors to further decrease non-performing assets and enhance its overall financial health.
By inviting EoIs and conducting auctions for NPAs, Union Bank of India continues its commitment to efficiently resolve distressed assets and optimize recoveries. This pioneering approach not only benefits the bank financially but also stimulates the overall health of the Indian economy by infusing liquidity back into the system. Defeating financial hurdles caused by NPAs remains a top priority for the banking sector, and initiatives such as this auction are significant steps towards achieving that goal.
