InvestorQ : What is a haircut & Why SBI is selling NPA's with a discount of more than 50%?
Pavithra Prabhakaran made post

What is a haircut & Why SBI is selling NPA's with a discount of more than 50%?

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K V RAO answered.
1 year ago

While what Hegde mentioned is true, there is another meaning to haircut. Lenders may ask borrowers to settle the outstandings for lesser dues waiving full interest portion or even part of the principal. As interest has been written off in NPA accounts, whatever sum realised over and above the principal is profits to the bank.

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Roshni Hegde answered.
1 year ago

Haircuts are nothing but a percentage of the amount which is deducted from your value of holdings solely for the trading purpose.

On Tuesday 28th May 2019 State Bank of India (SBI) put its four non-performing assets (NPAs) on sale. These assets were amounting Rs 230 crore on a 100% cash basis. The price of these NPAs may include haircuts of up to 79 %.

As per the latest report, the four NPAs put on sale are Lovely International and Lovely Enterprises, Abhijeet Ferrotech, Trichy Tanjavur Expressway, Madurai Tuticorin Expressway having the worth of Rs 95 crore, Rs 89 crore, Rs 24 crore and Rs 22 crore respectively.
The disclosed reports say over the reserve prices for these four accounts that the haircuts SBI is all set for 79%, 63%, 48%, and 43% haircut respectively.

Reserve price is the least amount that SBI has labeled up, the price at which it will be sold if no higher price is bid, or (2) if below SBI is not obligated to accept the winning bid.)