Icra reports surge in banks' NPA slippage

Bank loans worth Rs 22,000 crore which were recast under Strategic Debt Restructuring (SDR) in 2015-16 had slipped into the non-performing asset (NPA) category during the final quarter ended March of 2016-17, according to rating agency ICRA.

On a failure in SDR loans, banks have to start making provisions for these on the balance sheet, at a time when revenue growth has been tepid or stagnant and credit costs are going up.

SDR rules give lenders an 18-month window for bringing strategic investors for a troubled loan. In this period, the loans are treated as standard assets. It saves banks from having to make provisions for such loans.

The bill for NPA provisions might expand substantially — slippages from SDR accounts are estimated to have more than doubled to Rs 49,500 crore in the April-June 2017 period, according to ICRA.

In its sample set, 61 large borrowers having total debt of Rs 2,45,000 crore are currently undergoing a resolution through the SDR scheme.

As on December 31, 2016, about 72 per cent of the debt continued to be classified as a 'standard' advance, with the standstill clause on asset classification under the scheme.

Banks had begun restructuring some troubled corporate loans from sectors like iron & steel, power and construction from the middle of 2015-16 under SDR.

They'd converted part of these into equity, giving them stake in the company.