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| Loans referred for recast drop in April-December |
| Abhijit Lele / Mumbai Dec 18, 2010, 00:37 IST |
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With an improvement in business environment and economic growth, loans referred to the corporate debt restructuring (CDR) forum dipped to Rs 9,806 crore in April-December, as against Rs 17,390 crore in the year-ago period.
According to data from the forum, number of accounts (27) sent for debt recast in the nine months ended December were more than those (21) the forum took up in the year-ago period. However, the amount of outstanding loan involved was lower. The forum admitted six cases during October-December. The big ticket ones included Ramswarup Industries (Rs 1,797 crore), Murli Industries (Rs 1,177 crore) and Oudh Sugar Mills (Rs 884 crore).
A senior IDBI Bank executive said the decline was in line with an improvement in business environment. Some of the borderline cases (companies showing initial signs of troubles) which would have otherwise landed at CDR, were able to make timely repayment, which, in turn, negated the need for a reference.
While an overall improvement in economy is helping business units, it is too early to talk about any firm trend regarding revamp references to CDR. Airlines which have reeling under debt and were having difficulty in paying loans would be restructured outside the CDR forum.
The global financial crisis of 2008 put severe strain on companies across sectors like automobile, steel and textiles. In its aftermath, the CDR mechanism became more active in 2009-10. The references for recast rose substantially from April-June 2009. They started declining only April 2010 onwards.
There were many companies which were reeling under stress and could have turned into non performing assets. However, prompt action helped arrest the slippage. State Bank of India (SBI) alone has a restructured loan portfolio of over Rs 20,000 crore.
Despite an upturn in business cycle, some sectors are still showing signs of stress. A senior SBI official involved with restructuring packages said banks would be keeping an extra vigil on textile and gems and jewellery — sectors which continued to show stress. Both were export intensive sectors, with a limited ability to withstand adversity.
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