MUMBAI: While the Reserve Bank of India (RBI) wants banks to reduce their exposures to single companies to below ₹10,000 crore in the wake of rising non-performing assets, lenders may find it difficult to clean up their books by April 1, 2019 — the deadline proposed by the central bank.
Top companies, including Essar Group, Lanco Group, Jaypee Group, GMR Group, Videocon, GVK, Adani, Reliance, JSW Group and Vedanta Group, have taken loans in the range of ₹25,000-35,000 crore or more from one bank.
The RBI, in its draft guidelines, has proposed categorising such large borrowers, who have a total fund-based exposure of over ₹25,000 crore as “specified borrowers ”. This cap will be reduced to ₹15,000 crore in 2018-19 and to ₹10,000 crore by April 1, 2019.
Banks’ total exposure to large companies has almost doubled to ₹6.30 lakh crore, with S BI accounting for over 15%. Almost 90 companies have an exposure of above ₹10,000 crore.
If the RBI’s parameter is taken into account, many of the companies mentioned above will have to be tagged “specified borrowers”, and banks will have to reduce their exposures. And that’s where the problem begins.
”It will depend on how we can convince a promoter to sell some of his company’s non-core assets, bring in new investors or repay through cash flows. Of course, in the normal course, it will be difficult for us to reduce the exposure to each company,” a senior IDBI Bank executive said. To be able to find investors at a time when repayments are low and companies are finding it difficult to raise funds ,would be an uphill task.
{{/usCountry}}”It will depend on how we can convince a promoter to sell some of his company’s non-core assets, bring in new investors or repay through cash flows. Of course, in the normal course, it will be difficult for us to reduce the exposure to each company,” a senior IDBI Bank executive said. To be able to find investors at a time when repayments are low and companies are finding it difficult to raise funds ,would be an uphill task.
{{/usCountry}}“Demand is low for large distressed companies where loss or interest accrual has inflated unsustainable debt and where promoter creditability and support is perceived to be lacking,” a report by Religare Securities said.
Large companies accounted for 58% of total bank credit of ₹65.47 lakh crore at the end of March, 2016. Major loans had been given to infrastructure, steel, power and oil sectors . And the industry is not in the pink of health.
The Index of Industrial Production (IIP) contracted 2.4% in July, compared with a growth of 2% in June this year.