About 16 banks have put close to Rs 1.16 lakh crore of corporate loans on sale to asset reconstruction companies (ARCs) so far in this fiscal after being unable to recover them either through in-house resources or mechanism such as Debt Recoervy Tribunal (DRT) or Insolvency and Bankruptcy Code 2016.

The IBC 2016, brought in as a speedier mechanism, is delaying resolutions forcing banks to sell out.

Last week, State Bank of India surprised the markets by putting its Rs 15,000 crore loans to Essar Steel on sale at a 18% discount, about 500 days after it took the loan to the NCLT as a lead banker.

Rajnish Kumar, chairman, SBI, said, "There is a cost to money. If I sell off the loan, even at a discount, the bank gets Rs 9,500 crore to lend. As the loans age the provisions also go up. It is not prudent to lock up so much capital." SBI has put Rs 27,953 crore of loans in 62 accounts on sale in the auction process.

Banks are now asking for upfront cash, which is an issue the ARCs are trying to reconcile. The price levels that banks are looking at are not attractive enough for the ARCs. There is an interest from foreign banks like Deutsche Bank and Bank of America, hedge funds and foreign distressed funds to acquire assets, especially by bidding at the National Company Law Tribunal (NCLT).

The need to clean up the balance-sheet is also forcing many lenders to sell their loans. Banks which are active in the market include Bank of India, Dena Bank and Punjab National Bank.

Bank of India has put on sale Rs 29,801 crore loans on sale, including its Rs 2,700 crore exposure to Dighi Ports. It also includes the Rs 3,599 crore of loans to Visa Steel, which was in the NCLT, on sale. The bank had gross NPA of Rs 62,328 crore at the end of the half year ended September 2018. It expects to retain it at the same levels at the end of the fourth quarter by stepping up its recoveries and upgrades, and end the current fiscal with Rs 55,439 crore of NPAs.

So far only three of the 12 big default cases that RBI had flagged off to the banks have been resolved under IBC. These are Bhushan Steel, Monnet Ispat & Energy, Binani Cement and Electrosteel Steels. Others like Essar Steel are dragging on for more than 500 days, forcing banks to sell off the assets.

Bangalore-based Canara bank has put on sale Rs 6,061.34 crore of loans from 111 accounts on sale, the majority of which are infrastructure-related loans.

Among the private sector lenders, ICICI Bank has put Rs 2,721.83 crore of loans from 41 accounts on sale at various auctions. Besides this, the bank is also undertaking one-time settlements and looking at bilateral deals to bring down its stressed assets.

Dena Bank, which is under prompt corrective action (PCA), has put its loans of Rs 2,779.39 crore from 148 accounts, including ABG Shipyard, on sale. A consortium of banks has put Rs 6,953 crore exposure to ABG Shipyard to be resolved under NCLT.

IDBI Bank, which is also under PCA, is cleaning up its balance-sheet by putting Rs 33,885 crore of loans on sale at auctions, including loans to Jayaswal Neco. About Rs 3,900 crore of loans to the company has also been referred to NCLT. While UCO Bank has put Rs 890.46 crore from 21 accounts on sale, Union Bank has put 35 accounts with loans of Rs 2,769 crore on sale. United Bank of India had put Rs 2,014.73 crore from 103 accounts on sale.