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

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

In the past, P&S Bank had put its bad loan on block, but 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 Upkar Singh, general manager in charge of law and recovery of P&S Bank, said: Our approach is to sell an account only when we have got best price for the assets.

He said that due to this approach, the bank has been able to lower its gross NPA from 17.17% in 2005-06 to 0.74% in 2007-08. The level of gross NPA in the same period came down from Rs 1,197 crore to Rs 135 crore.

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

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, are put on block. The bank officials are targeting a cash recovery of Rs 100 crore in the first quarter and about Rs 300 crore during this year.

The bank itself 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 due was Rs 43 crore.