Turning NPAs into a channel for Business Opportunities

AHMEDABAD, India - Feb. 19, 2014 - PRLog -- Indian state owned banks are reporting Q3 net profit falls on account of higher provisioning for bad loans. This has prompted banks to become innovative approaches to manage NPAs.

In recent days and weeks Punjab National Banks, United Bank of India and State Bank of India all have posted weak financial results. SBI’s total provisioning of non-performing assets jumped up by 23 per cent to Rs 3,428.59 crore during the third quarter of the fiscal, as against Rs 2,766.18 crore a year ago. Gross NPAs, rose to 5.73 per cent in the quarter, as against 5.30 per cent a year ago.

Bulk of these NPAs comes from middle corporate and SME segment. Banks have been focusing and streamlining their processes to better manage the loans turning into bad loans. SBI has said to create zones (North, South, West and East) to own these NPAs and manage the stress recovery process independently. They have also shown interest in innovating and experimenting with new methods to find some success. SBI has also created several committees, which will be focusing on the loans, which show early signs of any possibility to turning to NPAs. SBI has created the structure of who will look for what sizes of NPAs. All these activities will provide better focus and quicker responses towards NPA management.

Banks use e-auctions from companies like https://www.bankeauctions.com/ and http://npasource.com/ to provide a transparent but secured environment for an interested individual or company to bid to avail such assets. Generally this approach is good and workable only if there is enough interest for these auctions. Unfortunately, huge portion of these NPAs is not getting enough (sometimes any bids) for those assets. Generally these assets are form of immovable assets, i.e. plant, land, building, machineries. For Banks to get value from these NPAs mean to be able to get some return on these. Machineries will be mostly counted as scrap metal and plant/factory/building of any commercial facilities will have huge depreciation as per book value. Hence, these become a valuable asset for companies who wants to expand and acquire those assets at cheap pricing. But problem lies into the fact that these companies who are looking to expand do not look into NPA stock of the banks or e-auction websites to find their next investment. They generally use their local business brokers, consultants, online websites such as www.indiabizforsale.com to identify their next investment opportunity in India.

To take care of this problem on lack of awareness of availability of NPA Business opportunities, indiabizforsale.com (http://www.indiabizforsale.com) has now recently introduced a new service called NPA promotion. They provide proprietary online promotional methods to drum up interest from investors for these NPAs. They also use social media like LinkedIn, Facebook, Twitter, Pinterest for achieving good awareness on such opportunities. Once they get details of NPAs, they work out promotional plan for that NPA and they start promoting that to their own network of business brokers and consultants, reach out to new investors through their monthly newsletter and social media promotions. Once they generate the interest, these leads are forwarded to that particular bank’s circle manager, who in turn provides further details of that NPA to the interested investors, after which they are directed towards e-auctions for a transparent bidding process.