With loans to MTNL turning into NPAs, PSBs may agree to 20% haircut

They have Rs 8,144 cr exposure to troubled telco

Public sector lenders to the ailing Mahanagar Telephone Nigam Ltd (MTNL) may agree to a 20 per cent haircut on their Rs 8,144 crore exposure to the state-owned telecom firm, with the loans turning into non-performing assets (NPAs).

 

The joint lenders’ forum for MTNL, comprising seven public sector banks (PSBs), recently discussed the matter and communicated its stance to the Department of Financial Services, multiple sources said.

 

“MTNL had offered to pay 40 per cent of its dues with a 60 per cent haircut to the PSBs a few months ago. But the proposal wasn’t acceptable to us. As a commercial organisation, we can’t absorb such losses, especially given the impact of NPAs on our balance sheets. We hope the Department of Telecom and MTNL will consider our concerns. Since MTNL is a public sector undertaking, government-level talks will be crucial,” a banker said.

 

The seven PSBs with exposure to MTNL are Union Bank of India (Rs 3,543 crore), Indian Overseas Bank (Rs 2,319 crore), Bank of India (Rs 1,054 crore), Punjab National Bank (Rs 454 crore), State Bank of India (Rs 337 crore), UCO Bank (Rs 260 crore) and Punjab & Sind Bank (Rs 176 crore). MTNL defaulted on these loans last year. 

 

Emails seeking comment from the Department of Telecom, the Ministry of Finance, MTNL, and the seven banks remained unanswered at the time of going to press. 

 

“Banks are maintaining reserve amounts to safeguard their loan portfolios amid these challenges,” said another banker. Three senior bankers said no meetings have taken place recently with MTNL or the Department of Telecom, though discussions within the government are underway.

 

Under Reserve Bank of India norms, banks must provision 15 per cent of their exposure when a secured asset is first classified as an NPA, noted Sanjay Agarwal, senior director at CareEdge Ratings. “Some banks may take an opinion of a likely higher charge and provide some incremental amount as additional provisions. Hence, it is likely that a large part of the required provisions would have been carried out by the bank,” said Agarwal.

 

MTNL’s consolidated net loss widened to Rs 890.3 crore in the second quarter of FY25, up from Rs 792.8 crore a year earlier. Revenue from operations fell 11.9 per cent year-on-year to Rs 174.23 crore for the quarter ended September 30, 2024, while total expenses rose 4.4 per cent to Rs 1,217.56 crore. As of September, the Government of India held a 56.25 per cent stake in the company.

 

The shares of MTNL rose 4.21 per cent on Wednesday, closing at Rs 45.3 apiece on the BSE.