The corporate debt restructuring (CDR) cell has admitted a staggering R59,600-crore worth of stressed loans in the current financial year. More cases are expected to come in by the year end even as the central bank ushers in a more stringent restructuring regime from April. The cell admitted loans of R67,088 crore in 2011-12, okaying recasts for an amount of R62,897 crore so far this year.
Among large corporate whose loans were recently recast are Hotel Leela, Bharti Shipyard, GTL, Suzlon and HCC. The banker said Tulip Telecom?s R1,800-crore debt referred to CDR cell has so far not received the requisite mandate from the lenders. The approval of a CDR package requires the mandate of at least 75 % of the creditors by value and 60% of creditors by number. ICICI Bank is the lead banker for the loan.
So far this year, the cell received a recast request almost once in three days, a sign of the severe stress on corporate cash flows. It admitted 13 cases to the tune of R6,807 crore in January. Some of the companies that sought restructuring include Parekh Aluminex at R2,200 crore, Arshiya International at R1,670 crore, Action Ispat & Power at R750 crore, Mahalaxmi TMT at R600 crore.
RBI on January 31 had issued revised draft norms based on the recommendations of the committee led by executive director B Mahapatra. The draft norms stipulate that banks increase the provisioning on existing restructured loans from the current 2.75% to 3.75% by 2013-14 and to 5% by 2014-15. In case of new restructured accounts, the provisioning requirement would rise to 5%, starting April 1, 2013.
The banking system could take a collective hit of an estimated R13,000 to R15,000 crore on its bottomline in next two years if RBI formalises the draft provisioning norms for restructured loans. The banker said with the possibility of the higher 5% provisioning norms on new restructured accounts kicking in from April, February and March could witness a rise in cases referred to the CDR cell.
Public sector banks which account for about 85% of the loans recast will be the most affected. At the end of the December quarter, Punjab National Bank?s restructured book was 9.6% of loan book, Indian Overseas Bank?s at 10%, Central Bank of India?s at 13.98%, Union Bank of India?s at 5.6%, Syndicate Bank?s at 6.3%, and Bank of India?s at 6.6%. Among the public sector lenders, State Bank of India (SBI) has kept its restructured books at more manageable levels of 3.54% of advances,as of September 30. In case of private sector lenders the proportion of restructured assets is much lower at 2.4% for Axis Bank, 1.5% for ICICI Bank, and 0.3% for HDFC Bank
According to Crisil, loans restructured by Indian banks will stand at sharply to Rs 3.25 lakh crore in financial year 2012-13. The proportion of restructured loans in this period will be around 5.7% of advances. The majority of restructuring will be in loans to the state power utilities and the construction and infrastructure sectors.