Textiles, steel to get debt recast breather

To help viable units, which are facing temporary cash flow problems, the Reserve Bank of India has permitted banks to restructure their debt exposures for the second time without downgrading these assets as bad loans. The sectors which are expected to benefit the most are iron & steel, textiles, automobile components and small units.

So far, banks could only restructure these exposures only once without changing the status of the accounts. The relaxation is however not available for commercial real estate, personal loans, credit cards and capital market exposures.

Governor D Subbarao said these steps have been taken to support sectors which are facing stress due to the economic slowdown.

 

Bankers said NPAs have risen sharply in sectors like retail. The global slowdown is also increasing the risk for other sectors and there have been rising instances of companies defaulting on loans. The RBI decision will help avoid piling up of bad loans and reduce the pressure on bottom-lines, as provisions for bad assets are made out of profits.

“The concept of restructuring of loans for the corporate sector is important. The RBI measures are critical for bankers to support and stand alongside borrowers in these turbulent times,” ICICI bank Joint Managing Director & CFO Chanda Kochhar said.
 

HOE THEY STACK UP Gross & net NPAs of top banks (Rs crore)
Bank	Gross NPAs		Net NPAs
	Sep '07	Sep '08	Sep '07	Sep '08
SBI	11,193.92	12,552.32	5,831	6,617.86
ICICI Bank	5,931.53	9,501.48	2,970.94	4,232.93
PNB	4,716.57	3,124.57	1,866.26	544.73
Central Bank	2,596.20	2,256.19	734.88	926.16
Bank of India	1,983.69	1,978.12	713.68	608.02
Bank of Baroda	2,129.14	1,954.39	496.55	509.24
Syndicate Bank	1,644.11	1,768.85	495.94	631.41
Indian Overseas	1,077.02	1,725.10	176.64	996.9
HDFC Bank	768.28	1,675.94	243.74	584.12
Uco Bank	1,681.88	1,533.55	1,064.59	948.69

RBI has also extended the concessional treatment of treating accounts as standard assets to commercial real estate exposures, which are restructured up to June 30, 2009. At present, bank loans to commercial real estate, capital market exposures and personal/ consumer loans are not eligible to retain the status as standard account after restructuring.

RBI also said as a onetime measure, the second restructuring done up to June 30, 2009 will also be eligible for exceptional regulatory treatment.

IDBI Bank Joint MD Jitendra Balakrishnan said many textile and iron & steel companies received support through the corporate debt restructuring (CDR) mechanism in the early part of this decade. This was the first round of restructuring for them. The RBI move will help some of these units to get relief for the second time, he said.