Aiming to reduce the level of bad loans to bare minimum, the Delhi-based Punjab & Sind Bank has put its big-ticket bad loans on block. According to the tender issued by the bank, 73 loan accounts with outstanding dues of over Rs 3,800 crore are to be auctioned.

The bank has opened its books for due diligence while the bidding is scheduled on June 16.

However, this is not the first time that the P&S Bank has put its bad loan on block. In the past when the bank did the same, it failed to sale all loans through this process. While market observes say the bank has pegged a very high level of reserve price, senior bank officials have disagreed.

According to the general manager in charge of law and recovery of P&S Bank, Upkar Singh, “Our approach is to sell an account only when we have got best price for the assets.” He said that due to this approach, it’s been possible for the bank to reduce its gross NPA from 17.17% in 2005-06 to 0.74% in 2007-08. In the same period, the level of gross NPA came down from Rs 1,197 crore to Rs 135 crore.

While upgradations were in the region of Rs 130 crore, the bank made a cash recovery of Rs 800 crore in the last three years. Better recoveries helped P&S Bank increase its profit to Rs 382 crore against a loss of Rs 72 crore in 2005-06.

Elaborating on the block, the senior officials indicated that only those accounts, where the NPA is above Rs 3 crore or where the suit filed amount is above Rs 3 crore, have been put on block. The bank officials also added that the bank was targeting a cash recovery of Rs 100 crore in the first quarter and about Rs 300 crore during this year.

The bank is trying to improve its reputation in the loans market. It has been negotiating very hard with the borrowers to improve its bad loans ratio. For instance, Mr Singh cited a recent case wherein the original loan amount was only Rs 40 lakh, the bank settled the account for Rs 35 crore. However, the outstanding continues to be Rs 43 crore.