A bout of reckless lending when the economy was in better shape some years ago, has come back to haunt banks. As cash flows of corporates come under stress, banks are having to offer more and more companies easier repayment terms or risk the asset going bad. After a loan recast worth R16,000 crore for GTL, R13,500 crore for

Gammon India and R11,000 crore for Suzlon, banks are now staring at a probable R10,000-crore recast for the Kolkata-based pipes maker Electrosteel Steels, which reported a turnover of just R163.11 crore in FY13.

The corporate debt restructuring (CDR) cell has also received a request from Soma Enterprises to recast R6,000 crore. Should banks decide that these companies deserve easier repayment terms, the quantum of recasts approved in the three months to June 2013, could hit R25,000 crore, way above the R15,000 crore restructured in the March 2013 quarter. Banks had restructured R2.3 lakh crore worth of loans through the cell at the end of March 31, 2013; this accounted for a share of 4.5% of their total loans. If bilateral restructuring, estimated at R1 lakh crore, is also taken into account, the share of such assets to total loans would be even higher at over 6%.

In a sluggish economy, banks have also taken a hit to their portfolios; gross non-performing assets (NPAs) as a share of total loans is roughly 3.4%. The situation for state-owned banks is worse with the combined NPAs and restructured assets, as a share of total loans, nudging 11%.

The Reserve Bank of India (RBI) recently tightened the norms for restructuring assets; promoters need to bring in 20% of the amount ?sacrificed? by banks or

2% of the restructured amount, whichever is higher, besides furnishing a personal guarantee.

As for banks, they will not have to set aside a higher 5% for assets restructured after June 1, 2013. For assets restructured earlier, the provisioning increases in phases from 2.75% currently to 5% by April 2015.

Electrosteel, bankers say, owes them R7,000 crore as principal and an additional R3,000 crore by way of interest. The 27-bank consortium will meet soon to consider the company?s request for more lenient repayment terms. State Bank of India has an exposure of close to R1,000 crore while Punjab National Bank has lent the company R400 crore, Indian Overseas Bank R350 crore and Oriental Bank of Commerce and UCO Bank R300 crore each.

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Non-bank lender Srei Infrastructure has an exposure of Rs 350 crore to the company.

The Umesh Kejriwal-promoted Electrosteel reported a loss of Rs 122 crore for the quarter ended March 31,2013 .The company?s total income rose 39.45% year-on-year to Rs 87.3 crore, but total expenses rose 63% from a year ago to Rs 150.86 crore.

Soma Enterprises and its highway construction arm have sought a recast of Rs 6,000 crore debt. In a consortium of 20 lenders, SBI is the lead bank. Arch Pharmalabs, Tulsi Castings, Pradip Overseas, Southern Biotech are some of the companies that have sought easier terms from the cell in June.

For the CDR cell to approve debt recast, 60% of the lenders by number and 75% by value must approve the package. In FY13, the cell approved 106 loans worth Rs 76,479 crore while in FY12, it okayed 30 cases worth Rs 39,311 crore. Apart from large exposures like Gammon India, worth Rs 13,500 crore, and two units of the Arshiya Group, worth Rs 3,000 crore, the cell has approved at least four more cases in June. Companies like Educomp Solutions, Forever Diamonds, Orchid Chemicals, Corporate Ispat, Shiv-Vani Oil & Gas Exploration, etc. have been referred to the CDR cell in June, bankers said.