Lenders to troubled jewellery manufacturer Winsome Diamonds and Jewellery (formerly Su-Raj Diamonds) are mulling over restructuring the company's Rs 4,000-crore debt.
A consortium of lenders, including Punjab National Bank and Canara Bank, had issued letters of credit (LCs) to Winsome for buying gold. However, after the firm failed to pay the bullion lenders, the latter invoked the LCs.
An LC is a document issued by a financial institution, assuring payment to a seller of goods, provided certain documents have been presented to the bank.
"We will look to recast the debt (of Winsome) in this quarter or the second quarter," said R K Dubey, chairman and managing director (CMD) of Canara Bank, which has an exposure of Rs 800 crore. The loans are yet to become non-performing assets (NPA) for banks but in case the debt is not restructured or a part of the interest or the principal is not paid by the end of this month, then some of the banks will have to classify it as NPA.
Central Bank of India's CMD M V Tanksale also said banks would look into the possibility of restructuring the debt with a viable repayment schedule.
Under debt restructuring, banks typically increase the repayment period of loans to stressed borrowers, offer a moratorium and reduce lending rates. "The problem started when the bullion banks demand accelerated payment, that is, before the payment was due. In such a situation, we have to give our borrower the opportunity. If banks believe the payment schedule as given by the borrower is viable and the loan will be recovered then we can do restructuring," Tanksale said on the sidelines of a banking seminar. Central Bank of India has an exposure of Rs 500 crore.
Bankers said they have met the company's management recently, which assured repayment. "We have met the company's management in Dubai. The management said though they are facing some problem now, they will pay. The promoters are in touch with the bankers," Tanksale said, adding the magnitude of the problem was big, so it could not be solved overnight.
Standard Chartered Bank is the lead bank of the consortium. Standard Bank of South Africa, Standard Chartered London, and Scotiabank have invoked the LC that they issued for Winsome after the company failed to pay within the agreed 90 days.
According to some banks, the export-oriented company might have exported jewellery to countries that are hit by the latest economic slowdown. So, the importers delayed payments to Winsome, which in turn defaulted to the bullion banks, from where it had bought the stock.
- A consortium of lenders, including Punjab National Bank and Canara Bank, invoked letters of credit (LCs) given to Winsome Diamonds for buying gold after the firm failed to pay the bullion lenders
- Banks would look to recast Winsome Diamonds debt in this quarter or the second quarter, said R K Dubey, chairman and managing director (CMD) of Canara Bank, which has an exposure of Rs 800 crore
- The loans are yet to become non-performing assets
- If the debt is not restructured or a part of the interest or the principle is not paid by the end of this month, then some banks would have to classify their exposure as NPA.