Banks' restructured assets to shrink 15%, says Icra

Restructured assets in the banking system will shrink by 15 per cent from March 2012 levels, due to the debt restructuring package for state electricity boards (SEBs), announced by the Cabinet Committee on Economic Affairs yesterday, says Icra in a report.

It says restructured advances will also come down and banks will have to make the provisioning of Rs 1,500-1,600 crore, impacting their profitability this financial year.

According to the Reserve Bank of India (RBI) data, restructured advances stood at 4.68 per cent of the total standard assets at Rs 2,18,068 crore as on end-March 2012.

The Icra report says the government’s restructuring package could subdue the immediate threat of state-owned power discoms’ loans slipping into non-performing assets (NPAs).

However, banks might need special dispensation from RBI to maintain standard loan classification of these accounts, as most discom loans have already been restructured.

According to Icra, lowering of interest rates for discoms will have a one-time impact on public sector banks’ profitability in 2012-13.

The rating agency warns that if rate revisions or other operational improvement measures are not sustained, it will be like postponing the underlying problem as it will give the lenders a false sense of low NPAs from SEBs for a few more years.

Icra says discoms should increase rate on all-India basis by 10-11 per cent to recover all the costs and service 50 per cent of debt after the restructuring package.

However, discoms with substantial debt such as those of Rajasthan, Tamil Nadu and Uttar Pradesh, will require annual increases of 15-17 per cent.