For the first time, Indian Overseas Bank (IOB) has appointed an external advisor to facilitate the sale of over ₹12,000 crore worth of non-performing assets (NPAs). The planned sale targets accounts stuck in litigation or undergoing liquidation, signaling a strategic push to recover value and enhance financial stability.
🔍 What the Sale Entails
- IOB is offering loans linked to stressed MSME, educational, and consortium-financed accounts, many already admitted under NCLT proceedings.
- Part of the portfolio includes a previously announced auction involving 46 NPA accounts valued at ₹11,500 crore. Prospective buyers were invited to participate in a catalog-style e-auction.
- This is part of a multi-year recovery strategy—IOB earlier announced plans to auction 92 NPA accounts totaling ₹13,472 crore (May 2024), and expects recoveries in the range of ₹5,500–6,000 crore in FY25.
📉 Why This Move Matters
- IOB’s gross NPA ratio has swung downward, falling from 11.69% in March 2021 to around 2.72% by September 2024, with net NPA sliding to about 0.47%. The Economic Times
- The sale aims to clean up remaining legacy accounts that remain unresolved through normal recovery channels. Institutional oversight via a third-party advisor may enhance bidder interest and valuation realization.
📊 Strategic Context & Financial Outlook
| Metric / Strategy | Details |
|---|---|
| NPA Sale Value | Over ₹12,000 crore |
| Accounts Targeted | 46 major accounts (~₹11,500 crore) |
| External Advisor Appointed | Yes, for faster recovery execution |
| Historical Sale Plans | 92 NPAs worth ₹13,472 crore (May 2024) |
| Expected Recovery (FY25) | ₹5,500–6,000 crore |
| Gross NPA Ratio (Sept 2024) | ~2.72% |
| Net NPA Ratio (Sept 2024) | ~0.47% |
🔍 Long-Term Impact & Industry Implications
- IOB’s use of portfolio auctions and third-party advisory may set a precedent among PSBs for resolving litigated and frozen exposures.
- Continued NPA clean-ups support IOB’s goal to manage net NPA below 1% and avoid prompt corrective action triggers.
- This initiative strengthens the bank’s balance sheet before critical raise in working capital and lending volumes in FY26.
✅ Final Take
Indian Overseas Bank’s decision to sell ₹12,000 crore of bad loans, guided by an external advisor, reflects a mature and resolution-focused strategy toward asset-quality recovery. With prior NPAs reduced and recovery numbers climbing, the bank appears firmly on track to restore financial health and unlock value from distressed accounts.
