Lenders Are Selling Their Bad Home Loans

It seems that ICICI bank has sold some of its non-performing loans to Arcil.

Rajiv Sabharwal, head of retail assets at ICICI Bank confirmed that ICICI Bank had recently done a deal with Arcil that involved a sale transaction to see bad home loans to Arcil. “We did this in the last quarter,” Sabharwal said.

Sources said ICICI had offloaded receivables worth Rs 1,000 crore, but Sabharwal said the number was around Rs 400 crore in the last quarter.

But what is interesting also, is:

ICICI an aggressive bank has been a pioneer in securitisation of loans. “We do play in this segment. We have been securitising both good and bad assets,” Sabharwal said.

Arcil aims to create a special purpose vehicle to handle mortgage backed securities.

... ..ICICI will still manage the securities such as collecting interest and handing it over to Arcil for a small fee. “At a future date when Arcil is ready, we will handover the management of the bad home loans to it,” said Sabharwal.

This sounds like they have sold the loans as a securitised portfolio. While the securities cannot be traded (as far as I know) they can be sold to someone who will then receive further interest and any recovered pricipal. So are home loans getting bad enough that the banks prefer to sell rather than recover? This may just be the beginning.

Disclaimer: This is not an original publication


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