Debt rejig norms could cost banks Rs.15k crore

For every Rs.10 lent by banks in 2012-13,more than a rupee of debt was recast.

Written by Pranav Nambiar | Mumbai | Published:April 6, 2013 11:02 am

For every R10 lent by banks in 2012-13,more than a rupee of debt was recast. While loans worth a staggering R76,479 crore were recast by the corporate debt restructuring (CDR) cell last year,banks have lent R6,35,866 crore to companies and individuals. As on March 31,the CDR cell is estimated to have approved 398 cases,worth R2.27 lakh crore. The banking system could take a collective hit of an estimated R13,000-15,000 crore on its bottom line in the next two years if the Reserve Bank of India (RBI) formalises the draft provisioning norms for restructured loans. Public sector banks,which account for about 85% of the loans recast,will be the most affected. At the end of the December quarter,Punjab National Bank’s restructured book was 9.6% of loan book,Indian Overseas Bank’s was at 10%,Central Bank of India’s at 13.98%,Union Bank of India’s at 5.6%,Syndicate Bank’s at 6.3%,and Bank of India’s at 6.6%.

In the 12 months to March,129 cases worth R91,495 crore were sought to be recast,compared with 87 cases worth R67,088 crore referred in 2011-12,a banker in the know said. Among large corporate whose loans were recently recast are Hotel Leela,Bharati Shipyard,GTL,Suzlon and HCC.

The CDR cell in the January-March quarter recast loans worth R15,016 crore,while it admitted 30 cases worth R31,103 crore during the quarter. The cell is still awaiting final mandates from banks in select cases and they may be added to the annual number later on,the afore-mentioned banker said.

Recently,metal pipe-maker,PSL had approached the CDR cell for a debt recast for loans worth nearly R4,600 crore,but is still waiting for requisite mandates from its lenders.

Similarly,Tulip Telecom’s R1,800-crore debt referred to the CDR cell too is waiting to receive the mandates. The approval of a CDR package requires the mandate of at least 75% of the creditors by value and 60% creditors by number. ICICI Bank is the lead banker for the loan.

The RBI on January 31 had issued revised draft norms based on the recommendations of the panel led by executive director B Mahapatra. The norms stipulate banks increase the provisioning on existing restructured loans from 2.75% to 3.75% by 2013-14 and to 5% by 2014-15.

Among the public sector lenders,State Bank of India (SBI) has kept its restructured books at more manageable levels of 3.54% of advances,as of September 30. In the case of private sector lenders,the proportion of restructured assets is much lower at 2.4% for Axis Bank,1.5% for ICICI Bank and 0.3% for HDFC Bank.

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