Defaulting promoters may get lifeline, lenders may defer pledged share sale

However, this isn't a blanket policy and will be implemented on a case-by-case basis; accounts granted relief will undergo supervisory review

Several promoter entities that are facing a deadline of March 31 to either repay loans or lose control over their companies, are likely to get a lifeline with public sector lenders planning a “deep restructuring” of their loans.

A banker said loan restructuring may be needed for some firms whose shares have been pledged as security for credit, and are finding it difficult to meet regulator norms like maintaining cover. “But this is not a blanket policy and will be implemented on a case-by-case basis,” he added.

A senior State Bank of India official said whatever changes in repayment done in restructured cases will not be considered as second restructuring. “There is case of disruption for three months due to which lenders may tweak schedules on case-by-case basis,” the official said.

Further, accounts granted relief will undergo supervisory review for justifiability on account of the economic fallout of Covid-19. “The intention is very clear not to push any non-performing asset under the carpet. Wherever there is genuine need, banks can go ahead with whatever they want to do,” SBI executive said.  

At present no new default has happened in the SBI, but the banking system is getting ready for companies facing difficulties.

While banks may relax selling pledged shares of defaulting companies, the non-banking finance companies may not adopt a similar strategy. The NBFCs have already started selling shares of companies which have defaulted to their loans.

Last week, several NBFCs started selling shares of Future group after the promoter entities failed to provide more collateral on their loans.

The total market capitalization of the group’s listed firms fell to Rs 10,740 crore from Rs 42,000 crore reported a year ago. At the same time, value of pledged shares fell by half to Rs 8,100 crore a year ago to Rs 3,868 crore currently which has made the NBFCs jittery.

“We made several request to the promoter to provide more collateral but as it was not provided, we had to sell its shares in the market,” said an official of a NBFC. The Future group has promised to sell its insurance venture to repay loans and is talks with various potential investors. But due to Corona virus pandemic, these talks are delayed.