Banks may freeze credit to Satyam

Banks, which are believed to have exposure to the beleaguered IT major, Satyam Computer Services, today said that they would look at options to stop sanctioning additional credit lines to the company and seek an auditor’s explanation from it. The banks said they would not be affected much following the findings of fraudulent transactions in Satyam’s balance sheet.

An official of Bank of Baroda, which too has an exposure to Satyam, said clients who admit to fraudulent accounting practices are not considered as normal customers. In such cases, banks can look at options to stop giving additional lines of credit.

The country’s largest private sector lender, ICICI Bank, which has an exposure of Rs 3 crore to Satyam, said the developments would not have any material impact due to this investment.

“ICICI Bank has no fund-based or non-fund based exposure to Satyam Computer Services (Satyam) other than a marginal exposure of about Rs 3 crore on account of a forward contract. Satyam has a deposit with ICICI Bank in a current account. The balance in this account is not material,” said an official statement issued by ICICI Bank.

As of September 2008, the total secured debt of Satyam as per the company’s balance sheet was about Rs 253 crore. Sources said that given the overstatement in terms of cash balances, the debts are likely to become non-performing loans (NPLs). Unsecured debt of the company was around Rs 235 crore during the same period.

The country’s second-largest private sector lender, HDFC Bank, said it has a marginal exposure to Satyam by way of auto loans. Sources said that the bank was not concerned about these loans as there was no default in repayments.

However, state-owned lender Bank of Baroda’s exposure to Satyam could not be ascertained.

Foreign lenders HSBC and Citibank, however, declined to comment on their exposure to Satyam, saying that the banks do not comment on client-specific transactions.