Loans to Nagarjuna Fertilizers and Chemicals (NFCL) have slipped into the non-performing asset (NPA) category and have been classified as such by IDBI Bank in the September quarter, people aware of the development told FE. The company’s total debt stood at Rs 1,453 crore, as on March 31.
The current quarter has seen banks and other lenders scrambling to find resolutions for older NPAs — accounts of over Rs 2,000 crore that had been in default for 180 days since March 1 and had to be resolved by August 27, as per the Reserve Bank of India’s (RBI) February 12 circular. Few new slippages have been reported in Q2.
Bankers say there are not many lumpy accounts that are likely to slip. “There are small slippages here and there, but not very large exposures. Nagarjuna Fertilizers is one of the few large exposures to become a fresh NPA,” a banker said on condition of anonymity.
On February 20, India Ratings had affirmed a ‘D’ rating on Nagarjuna Fertilizers’ fund-based limit of Rs 803 crore, non-fund-based limit of Rs 1,181 crore and long-term loans worth Rs 545.5 crore. “The affirmation reflects NFCL’s continued delays in debt servicing during the 12 months ended January 2018, due to its tight liquidity position,” the rating agency stated in the rationale for its action.
An email sent to NFCL remained unanswered till the time of going to press.
The June quarter saw fresh slippages for the banking sector declining to Rs 92,000 crore from to Rs 2.44 lakh crore during Q4FY18. The value of gross NPAs (GNPAs) on banks’ books fell to Rs 10.03 lakh crore from Rs 10.25 lakh crore at the end of March. This was the first sequential decline in NPAs after 18 quarters. The GNPA ratio declined to 11.52% on June 30 from 11.68% as on March 31, while the net NPA (NNPA) ratio improved to 5.92% from 6.27%.
Analysts expect the improvement in bad loan ratios to continue. Anil Gupta, head, financial sector ratings, ICRA, wrote in a recent note, “With ongoing resolution of stressed assets, despite fresh slippages, we expect GNPAs and NNPAs for the banking sector to reduce to 10% and 4.3% respectively by March 2019; the same may be higher at 12.2% and 5.6% respectively in absence of resolution.”