MUMBAI, June 28: The saga of bad loans is continuing. Reckless financing of projects has started backfiring on institutions with many borrowers failing to return the loans taken from institutions. IDBI, ICICI and IFCI, the three major financial institutions leading industrial activity in the country, have reported a massive increase in non-performing assets (NPAs) - the banking jargon for loans defaulted by borrowers - for the year 1997-98.Even massive bail-out operations have not helped defaulted borrowers with institutions taking a big hit at the cost of promoters who have benefited immensely from such exercises. The NPA level of IDBI, the largest among the lot, went up from Rs 4,365 crore to Rs 5,101 crore during the year ended March 1998. ICICI's NPA showed a steep rise from Rs 1,950 crore to Rs 2,810 crore. And IFCI, which announced its results last week, is yet to announce its final NPA figure.However, IFCI chairman K D Agrawal had gone on record saying that the institutions had to make a higherprovision of Rs 403 crore against NPA this year. IFCI had to delay the finalisation of accounts as its auditors were tough on making provisions. ``The actual NPA level of banks and institutions will be at least six times more than the reported figure if ones takes into account the accumulated interest charge over the years,'' said a director of a public sector bank. Institutional sources said not less than Rs 2,000 crore of FI loans have been defaulted - if a borrower defaults for two quarters it is considered a NPA - in 1997-98 alone. ``The figure would have gone up steeply but for bail-out plans,'' admitted a FI source, adding, ``but 1997-98 was a bad year for the industry in general.''The rise in FI NPA level has happened at a time when commercial banks are already carrying NPAs to the tune of Rs 42,000 crore. "The fact of the matter is that several loans have been given without proper project appraisal and due diligence, " the FI source said. Several promoters have become bold enough to inflate theproject costs and seek institutional loans only to siphon of this money to their private coffers. Several industry groups have managed to get more loans even after defaulting on earlier loan commitments. To top this, many promoters who are facing tough times have managed to get institutional guarantees for ECBs and similar loans. If these corporates default on their commitments, the liability will fall on institutions.While an industry house specialising in steel got the special concession of postponement of loan repayment, another business group which is into textiles and terry-towels got an interest waiver of around Rs 40 crore. A Delhi-based polyester maker was allowed to salt away funds through its subsidiaries. At least two top companies were allowed the roll-over facility to prevent these loans from becoming NPAs. The loans extended by an institution to an industry group engaged in steel, oil and shipping exceeded 25 per cent of the former's net worth. Companies in textiles, steel, synthetic fibreand chemical segments account for a lion's share of the bad loans.The time has come for the Reserve Bank of India and the Finance Ministry to bring down the NPAs. Especially so as the government is not the sole owner of these institutions which have gone public. It is the concern of thousands of shareholders also.
