Finance ministry no to public sector banks taking haircut on MTNL loans

If allowed, this would amount to default by central government, it says

The Union finance ministry has rejected Mahanagar Telephone Nigam’s (MTNL’s) proposal for public sector banks (PSBs) to take a haircut on their debt to the struggling telecommunications (telecom) company, according to a senior government official.

 

“We are currently in the process of resolving MTNL’s debt. We are in discussions with the Department of Telecommunications and MTNL. We have rejected their request for a debt haircut, as MTNL is a public sector enterprise, and this would amount to a default by the central government,” the official said.

 

PSBs have an exposure of ₹8,144 crore to the state-owned telecom firm, with the loans turning into non-performing assets. The seven PSBs with exposure to MTNL are: Union Bank of India (₹3,543 crore), Indian Overseas Bank (₹2,319 crore), Bank of India (₹1,053.8 crore), Punjab National Bank (₹454 crore), State Bank of India (₹337 crore), UCO Bank (₹260 crore), and Punjab & Sind Bank (₹176 crore). MTNL defaulted on these loans last year.

 

Earlier, Business Standard reported that public sector lenders to MTNL had expressed willingness to absorb a 20 per cent haircut, though MTNL had sought a 60 per cent reduction a few months ago.

 

However, the senior government official added that while discussions are ongoing about selling some assets, complications have arisen. The land provided by the state government in the 1950s and 1960s comes with restrictions, allowing it to be used solely for telephone services, which hinders monetisation efforts. 

 

Nevertheless, the government has approved the monetisation of MTNL’s assets worth ₹16,000 crore, which will help facilitate debt repayment and operational restructuring.

 

MTNL’s consolidated net loss widened to ₹890.3 crore in the second quarter (Q2) of 2024-25 from ₹792.8 crore in Q2 of 2023-24. Revenue from operations declined 11.9 per cent year-on-year (Y-o-Y) to ₹174.23 crore in the quarter ended September 2024, while total expenses rose 4.4 per cent Y-o-Y to ₹1,217.56 crore. As of September 2024, the Government of India held a 56.25 per cent stake in the company.

 

MTNL’s share price rose 2.74 per cent on Friday to close at ₹52.2 on the BSE.

 

Sources also indicated that the government is set to fast-track the monetisation of land assets from various central public sector enterprises (CPSEs), with the National Land Monetisation Corporation (NLMC) directed to speed up the process.

 

NLMC will act as an advisory body, supporting government entities and CPSEs in monetising their non-core assets efficiently and professionally.

 

Finance Minister Nirmala Sitharaman, in the Union Budget 2025-26, announced the launch of the second asset monetisation plan for 2025-30, aiming to generate ₹10 trillion by monetising government-owned assets and reinvesting the funds into new infrastructure projects.

 

Department of Disinvestment and Public Asset Management Secretary Arunish Chawla, in a media interview, spoke about asset monetisation plans for both MTNL and Bharat Sanchar Nigam (BSNL). “We are going to help MTNL and BSNL monetise their assets so that the value locked in can be redeployed, liabilities are cleared, and we can re-energise the sector,” Chawla said last week.