Debt restructuring proposals of small micro-lenders in Andhra Pradesh have hit a roadblock, as banks are not confident of extending repayment tenures, converting part of the loans into equity and recovering money from the firms, even if the rates are cut.
While the loans of BASIX Group’s microfinance arm were referred to the corporate debt restructuring (CDR) cell earlier this month, micro-lenders like SWAWS Credit Corporation, Cresa Financial Services and Nano Financial Services have not been able to convince their bankers of a similar plan.
SWAWS Credit Corporation, a Secunderabad-based microfinance institution, had asked banks to convert a part of its debt into equity and defer the repayment of the remaining loans. It is learnt its lead bank, Punjab National Bank (PNB), which has the highest loan exposure in the company, has not yet agreed to convert the debt into equity.
SWAWS chief financial officer K Rahul said, “Our case was discussed, but no consensus was reached (among banks). We have requested banks to convert 15 per cent of the loans into Tier-I equity and another 15 per cent into preferential shares. PNB is still indecisive. We will probably have to re-work the plan.”
The micro-lender has over Rs 90 crore of loans to 14 banks. According to norms, to refer a loan restructuring plan to the CDR cell, at least 60 per cent of the creditors (by number) or 75 per cent of the lenders (by value) have to approve the package.
For Cresa Financial Services, a Rajamundry-based micro-lender, banks have not even discussed the loan restructuring proposal. Chief executive V Prabhudas said, “We have not heard from our bankers. We are not able to recover the money we have lent because of the crisis. Our borrowers are saying they would only repay if they get fresh loans. But in the last 20 months, we have not received any fresh funding. In this scenario, it is impossible to repay our existing debts.” The microfinance company had borrowed about Rs 24 crore from Indian Overseas Bank and Bank of Maharashtra.
Hyderabad-based Nano Financial Services has been able to convince only three of its five lenders to restructure its debts. Despite this, the micro-lender’s case is not being referred to the CDR cell. Chief financial officer G L Swamy said, “Banks that have agreed to restructure debts would do it individually. These have also asked for guarantees from promoters on these loans.”
The company has about Rs 30 crore of loans from five banks. So far, banks have only agreed to restructure the debt of BASIX Group’s micro-lending arm, Bhartiya Samruddhi Finance (BSFL), which has about Rs 700 crore of debt from banks.
