Large banks have done a fair bit of loan restructuring via the bilateral route in the last couple of years, even more than amounts recast through the CDR (corporate debt restructuring) cell.
For a clutch of nine large banks, the total restructured portfolio, at the end of March, 2013, was R1.8 lakh crore ? of this the bigger chunk of R1.2 lakh crore or 67% had been bilaterally restructured compared to the R58,366 crore routed via the CDR cell.The proportion of loans being recast bilaterally has gone up in FY13, over the 50% share in FY12, data compiled by rating agency CARE showed.
The trend may continue into FY14, given that the multi-lateral restructuring of short-term liabilities of the UP and Haryana state electricity boards are likely to be approved in June. Cumulatively, the two restructuring cases would add up to over R45,000 crore. While the cases of SEB restructuring may be one-offs, the trend of higher bilateral restructuring has been picking up over the course of FY13. This included large infrastructure projects such as Reliance Power’s Sasan Project, where an exposure of over R 1000 crore was restructured bilaterally by the State Bank of India in the January ? March quarter.
“The major cases of restructuring were in the construction, infrastructure and steel sectors, but now the government has done a lot of work to improve conditions there so things should improve this year,” said another senior official from a public sector bank.
“There will be some restructuring on the state electricity board (SEB) side. So one or two cases may make the restructured portfolio look big. But these numbers don’t tell the entire story,” said RK Bansal, executive director, IDBI Bank. Meanwhile, CDR cases will likely come down in April-June, with bankers pointing to the reducing pace of restructuring, lenders said. In May, the value of loans approved by the CDR cell, stood at R804 crore, as against R5,848 crore worth of loans approved in April. While, loans worth R2,517 crore were admitted to the CDR cell in May, compared with R4,747 crore worth of loans admitted in the preceding month.
While no clear reason emerged for bankers moving more towards bilateral restructuring, some analysts suggest that procedures used for bilateral restructuring may not be as stringent as those used by the CDR cell.
This may make it easier for individual banks to restructure accounts quickly although in such cases, the risk of eventual default may rise. However, with the RBI’s new restructuring guidelines tightening prudential norms for all kinds of restructuring, any advantages of bilateral restructuring over corporate debt restructuring may even out.