Banks may recast Rs 2-trillion loans, says SBI chairman Rajnish Kumar

Banks are expected to restructure loans worth Rs 2 trillion, State Bank of India (SBI) Chairman Rajnish Kumar said on Tuesday, as the economic fallout from the Covid-19 pandemic renders many borrowers unable to pay back loans on time.

This estimate covers corporate; micro, small & medium enterprise, and retail segments. Of this, Rs 20,000 crore of restructuring may have to be done by SBI.

India Ratings had earlier said banks may have to restructure loans worth Rs 8.4 trillion. There is not a lot of demand for restructuring and a quick recovery in the economy will limit the recast exercise, the SBI chairman said.

Addressing a banking webinar organised by the Confederation of Indian Industry, Kumar said the bank expects a few large companies with loans above Rs 1,500 crore to apply for restructuring their debt.

Many large companies have already cleaned up their financials and deleveraged their books. Also, companies are reluctant to carry the tag of restructuring, he said.

Aviation, hospitality and high-street retail are some of the segments impacted the most by the pandemic. The real estate sector had already been struggling for four to five years and the pandemic only added to problems, he said.

On economic recovery, the SBI chief said a sound financial system is necessary for revival and, hence, banks should take steps to mitigate risks like recognising NPAs.

Investments in the infrastructure sector will help put the economy on the revival path. The funding infrastructure pipeline (of Rs 110 trillion or $1.5 trillion) of five years, can give boost to economy in a big way, he said.