By Devidutta Tripathy

MUMBAI (Reuters) - India's state-run IDBI Bank Ltd is betting on slowing the pace of additional bad loans, improving operating profit and selling non-core assets to help turn around its fortunes after reporting its fourth-straight quarterly loss on Tuesday.

At the end of its second quarter to the end of September, IDBI's gross non-performing loan ratio reached 25 percent, the highest among all Indian banks, with loan-loss provisions in the quarter rising 39 percent from a year earlier.

In an interview with Reuters, top bank executives said the focus was on curbing additional bad loans in the second half of the financial year as well as cutting costs to help improve operating profit.

To aid a turnaround, the bank also aims to raise 50 billion rupees ($773 million) by March from the sale of non-core assets.

"There is definitely a light at the end of the tunnel. There is absolutely no doubt about that," said K.P. Nair, one of the bank's two deputy managing directors.

Indian banks' soured loans hit 9.5 trillion rupees at the end of June, with state-run lenders accounting for the bulk of it, after a prolonged economic slowdown and in some cases due to profligate lending practices.

With record bad loans choking new lending and delaying economic recovery, the regulator and the government have been on a clean-up drive, steering defaulter companies to bankruptcy under a newly enacted law.

The Indian government also announced a $32 billion recapitalisation plan for state banks, which will help lenders including IDBI resolve their bad loans and boost capital ratios.

The Indian government had a plan to cede majority control in IDBI by selling a stake to private investors in a test case for reforms, but talks have stalled amid the surge in the bank's bad loans and continued losses.

"There is nothing continuing as of now," Nair said, referring to talks for a stake sale.

The bank reported a net loss of 1.98 billion rupees in the second quarter, smaller than its first-quarter loss of 8.53 billion rupees. In the year-ago second quarter, it had posted a profit of 555.2 million rupees.

Slippages or additional bad loans in the September quarter were also lower at 33.81 billion rupees, compared with 76.59 billion rupees in the previous quarter, and 55.87 billion rupees a year earlier. Recovery and upgrades of bad loans also improved in the half year ended Sept.30 from a year earlier.

IDBI Bank has outstanding loans of about 175 billion rupees to 11 of the companies that have been taken to bankruptcy court after a central bank order, the bank's other deputy managing director G.M. Yadwadkar said, adding they have provision coverage of 43 percent on those loans.

It has 112 billion rupees more in loans to 19 other companies that are in a second central list for potential bankruptcy proceedings with provision coverage of 30-35 percent, he said.

($1 = 64.7200 Indian rupees)

(Reporting by Devidutta Tripathy; Additional reporting by Samantha Kareen Nair in Bengaluru; Editing by Keith Weir)