Among those that sought more lenient terms to repay their
loans were Orchid Pharmaceuticals and Chemicals, which wants R2,100 crore recast; Chennai-based Surana Industries, which is looking to rework terms for R900 crore; and AMW, to which banks have an exposure of R300 crore.
Between January and December, the value of loans recast was close to R77,000 crore while the value of loans referred crossed R1.4 lakh crore. Given the slowdown in the economy, bankers believe many more customers will need help to tide over the situation.
They anticipate at least R15,000-20,000 crore will be restructured before March. State Bank of India (SBI), which restructured nearly R6,165 crore of loans in Q3FY14, indicated it might need to restructure close to Rs 10,000 crore of loans over the next few quarters. At ICICI Bank, restructured advances during the third quarter were R1,776 crore with the management pointing to a pipeline of R3,000 crore.
In its recent guidelines aimed at spotting troubled loans quickly, the Reserve Bank of India (RBI) wants any loan recast proposal of over Rs 500 crore to be vetted by an independent panel. The central bank has put in place a framework that will help banks pick up any sign of trouble early in the day. So for instance, even if a company is late on its payments of principal or interest by less than 30 days, banks will need to classify these as specially mentioned accounts; a delay over over 61 days would necessitate the setting up of a joint lenders forum (JLF) that will decide how the loan is to be treated. The JLF must finalise a restructuring package within 30 days if lenders find it technically viable.
VR Iyer, chairman and managing director, Bank of India, had said after announcing the banks October-December results that the rate of slippages from restructured assets to non-performing assets was on average about 16%. Iyer observed that close to Rs 300 crore had been restructured during the quarter and the estimated pipeline was around Rs 1,500 crore. Most of the proposals in the CDR cell will be restructured this quarter itself, the CMD said.
To incentivise banks to resolve issues quickly, the central bank has said it will allow them better regulatory treatment of stressed assets if an action plan gets under way. However, the lack of solutions will attract accelerated provisioning. The RBI will permit banks to sell their loans at a loss, and to amortise the costs over two years, which will help because the hit to the P&L would be staggered.
Union Bank of India restructured loans worth Rs 1,004 crore in the October-December period, of which Rs 640 crore is owed by state discoms. The bank has a restructuring pipeline of Rs 1,800 crore for the January-March period, a big chunk of which will be accounted for by one account, Arun Tiwari, CMD, said.