Loan recast proposals inch to Rs 4lakh cr markhttps://indianexpress.com/article/business/banking-and-finance/loan-recast-proposals-inch-to-rs-4lakh-cr-mark/

Loan recast proposals inch to Rs 4lakh cr mark

The RBI has also made it clear that the existing “regulatory forbearance” would no longer be available from April 1, 2015.

 The CDR cell of banks have approved a record number of 443 cases involving Rs 2,89,298 crore as on December 31, 2013.

The CDR cell of banks have approved a record number of 443 cases involving Rs 2,89,298 crore as on December 31, 2013.

Debt recast requests from corporates, including those already approved by the corporate debt restructuring (CDR) cell of banks, have crossed the Rs 3.6 lakh crore mark.

The CDR cell of banks have approved a record number of 443 cases involving Rs 2,89,298 crore as on December 31, 2013.

The CDR approvals have crossed the Rs 3 lakh crore-mark with debt packages for another Rs 12,000 getting the required approvals in the January-March 15 period of this year. The latest is the Rs 3,500 crore recast package of Orchid Pharmaceuticals which was approved by the CDR cell last week.
What has raised alarm bells among the bankers is that CDR proposals for over Rs 65,000 crore are pending before the CDR cell.

“Some of them would have turned into NPAs. Some fresh cases are likely to emerge in the coming weeks. There are cases of failed CDRs as well. CDR requests will touch Rs 4 lakh crore mark by April,” said a banking source.

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Bankers have been insisting that companies seeking loan recasts should make regular payments before their cases are cleared.

Banks have delayed ABG Shipyard’s Rs 11,500 CDR loan recast as the company has turned irregular in servicing their loans. A CDR package is approved when 75 per cent of the lenders by value and 60 per cent by number agree to the proposal.

To add to the miseries, the number of failed recast cases is also rising with bankers blaming the slower-than-expected economic recovery and delayed clearances for projects for such failed restructuring cases.

Meanwhile, NPAs and restructured loans in the Indian banking sector has crossed 10 per cent of total advances and, according to rating agency Crisil, could reach close to 15 per cent in another year.

PSU banks have one of the most dismal records on the stressed assets front, with some reporting gross NPAs of over 6 per cent.

India Inc’s loan recast proposals have continued without any let-up even after the Reserve Bank of India directed banks to almost double provisions for new restructured loan accounts from June 1, 2013.

RBI wants the provisioning at 5 per cent against the current 2.75 per cent. For existing restructured standard accounts, provisions will be increased in stages — 3.5 per cent (from March 31, 2014), 4.25 per cent (March 31, 2015) and 5 per cent (from March 31, 2016).

The central bank last month unveiled the final guidelines (for stressed assets) with many new provisions like the formation of a Joint Lenders Forum, more sacrifice by promoters and sharing credit info through a new system.

The RBI has also made it clear that the existing “regulatory forbearance” would no longer be available from April 1, 2015. The tightening of loan recast norms and the absence of regulatory forbearance have prompted many banks to sell their NPAs to asset reconstruction companies. The flurry of activity on the CDR front could be to take advantage of the current system before tighter norms set in.

According to a study by CARE Rating , gross NPAs of the banks showed an increase of 38.11 per cent (year-on-year) in the first half of FY14 vis-à-vis a credit growth of 17.96 per cent (year-on-year) during the same period.

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Gross NPAs of the public sector banks saw an increase of 41.41 per cent while that of the private sector banks was comparatively lower at 12.91 per cent.