Banks’ NPV loss could be close to R4,000 cr
What is the immediate impact on banks of the SEB restructuring package?
From our understanding of the package, the impact on the net present value would be approximately R4,000 crore. The conversion into bonds would possibly mean that banks will earn a lower coupon — less than 9% — that they would have earned on the loans, which would have attracted say an interest rate of 10.5% or more. Nevertheless, the coupon on the state government bond would be higher than that on a union government bond. Most of the exposure is with PSU banks they would be hit more than others.
From the banks’ point of view are bonds better than loans?
The bonds are a debt of the state government, but are better than a government-guaranteed loan. The bonds will be issued over time perhaps between two years and five years and till that time the discom will pay interest. From a technical perspective
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