Corporate sector debt worth a whopping Rs 15.52 lakh crore, or 29.4 per cent of the banking sector debt to the industry, has come under stress after Covid-19 hit India and lockdown was imposed across all the states since the last week of March this year.
The KV Kamath committee, which worked out the financial parameters for loan restructuring, has said banking debt worth Rs 23.71 lakh crore, or 45 per cent of banking sector debt, was already under stress before Covid-19 hit the economy. This effectively means, according to the industry matrix in the report, 72 per cent of the banking sector debt worth Rs 37.72 lakh crore remains under stress. This is almost 37 per cent of the total non-food bank credit.
The Kamath panel has said companies in sectors such as retail trade, wholesale trade, roads and textiles are facing stress. The sectors that have been under stress pre-covid include NBFCs, power, steel, real estate and construction among others.
Of the Rs 15.5 lakh crore loans impacted by the pandemic, the biggest ones are retail trade and wholesale trade as bank loans worth Rs 5.42 lakh crore have been impacted. Loans worth Rs 1.94 lakh crore to the roads sector and Rs 1.89 lakh crore to the textile sector has also been impacted, the report showed. Among other major industries that have been impacted by the pandemic and to whom banks have sizeable exposure include engineering (Rs 1.18 lakh crore), petroleum & coal production (Rs 73,000 crore), ports (Rs 64,000 crore), cements (Rs 57,000 crore), chemicals (Rs 54,000 crore) and hotels & restaurants (Rs 46,000 crore), among others.
According to the report, among the sectors that have been under stress pre-Covid have major outstanding to banks include NBFCs (Rs 7.98 lakh crore), power (Rs 5.69 lakh crore), Steel (Rs 2.66 lakh crore), real estate (Rs 2.29 lakh crore) and construction (Rs 1,03 lakh crore) among others.
The Kamath committee said the pandemic has affected the best of companies. “These businesses were otherwise viable under pre-Covid-19 scenario. The impact is pervasive across several sectors but with varying severity — mild, moderate and severe. Based on past experience, it takes a few months to finalise a large restructuring proposal because of the host of compliances,” the panel said.
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Financial sector experts say while stress in various sectors post Covid is understandable, the fact that almost 45 per cent of banking sector debt was under stress prior to Covid is a major concern area. “This report has shown 45 per cent of overall debt exposure was under stress even pre-Covid. It’s an useful exercise in understanding how systematically we would have solved them under normal resolution process,” said Srinath Sridharan a senior BFSI leader.
Some say even loans that were under stress pre-Covid can go for restructuring if “the arrears are less than 30 days and the account has been standard,” he said. The last word on Covid-induced stress is yet to be heard, experts say. “Covid-19 is still looming and various states have continued or reinstated lockdown. Further still various restrictions are put on various industries. Hence, it is premature to expect even reasonable certainty in cash flow projections in view of continued uncertainty,” said Jyoti Prakash Gadia, MD at Resurgent India.
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