The run rate for referrals remained high at Rs 11,000 crore in January, albeit lower than the Rs 18,500 crore in December.
Among the bigger requests for restructuring is the one put forward by the Hyderabad-based IVRCL, which is looking for easier terms to repay Rs 6,500 crore — a 21-member consortium led by State Bank of India will decide on the request. Going by recent evidence, however, it’s likely bankers will give in to the borrower’s request. Smaller firms that have put in requests for lenient repayment conditions include the Nagpur-based Gupta Coal India, promoted by Padmesh Gupta and with interests in coal, mining and logistics, which wants Rs 2,000 crore recast. Power infrastructure provider Deepak Cables — based in Bangalore and promoted by K Surya Rao — is also hoping to recast Rs 1,000 crore.
Between January and December, the value of loans recast was close to Rs 74,000 crore while the value of loans referred crossed Rs 1 lakh crore. Given the slowdown in the economy, bankers believe more borrowers will need help to tide over the situation. They anticipate at least Rs 15,000-20,000 crore will be restructured before March. At ICICI Bank, for instance, restructured advances during the quarter were Rs 1,776 crore and the management indicated there was a pipeline of Rs 3,000 crore.
VR Iyer, chairman and managing director, Bank of India, had said after announcing the bank’s October-December results that the rate of slippages from restructured assets to NPAs 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 confirmed.
Meanwhile, the central bank has put in place a framework that will help banks spot signs of trouble early in the day. 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 (SMAs); 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.
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, observed.