Tag: state bank of india

Large private banks undercut smaller ones in corporate loans, BFSI News, ET BFSI

Banking & Finance

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The battle among banks for corporate loans pie is getting fierce even as corporates look at bond markets for cheaper fundraising to refinance existing high-cost loans.

Large private banks are offering aggressively priced refinance loans to lower-rated corporate borrowers of smaller banks.

The rates offered are almost 200 basis points lower than the market rate, which smaller banks are unable to match, according to reports.

With the Reserve Bank of India maintaining an accommodative stance, there is abundant liquidity in the market and rates are at rock bottom. Corporates whose loans are up for refinance are looking to take advantage of the opportunity to cut their interest costs.

PSU banks

PSU banks took are taking a hit.

The domestic corporate loans by the State Bank of India fell 2.23 per cent to Rs 7,90,494 crore in the quarter ended June 30, 2021, compared to Rs 8,09,322 crore in the same quarter last year. In the first quarter of FY21, SBI reported 3.41 per cent growth in corporate advances.

Union Bank of India‘s share of industry exposure in domestic advances dropped to 38.12 per cent at Rs 2,40,237 crore from 39.4 per cent at Rs 2,47,986 crore in the same quarter a year ago. Corporate loans dropped 3% at Indian Bank during the last quarter. At PNB, corporate loans fell 0.57 per cent at Rs 3,264,66 crore in June quarter 2021 compared to Rs 3,28,350 crore a year ago. However, HDFC Bank expanded its corporate loans over 10% in the April-June quarter to about Rs 3.15 lakh crore.

Up to May, the gross loans to large industries declined by 1.7 per cent year­-on­year, according to RBI data.

Ceding ground to private-sector rivals

The market share of public sector banks in loans declined to around 59 per cent (of all scheduled commercial banks’ outstanding credit) in December 2020 against around 65 per cent in December 2017.

However, during this period, PvSBs market share rose to around 36 per cent from around 30 per cent, going by Reserve Bank of India data.



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Two new bidders for Lavasa, BFSI News, ET BFSI

Personal Finance

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Creditors to the former Hindustan Construction Company (HCC) controlled Lavasa township have received two bids for their Rs 6,000 crore loans outstanding in a third round of bids for the debt-laden company.

Two bids from Alchemist ARC president Srishti Dhir along with her brother Madhav Dhir and little known Darwin Projects are being considered by lenders, three people familiar with the bids said.

Srishti Dhir confirmed that she has bid in her personal capacity in association with her brother Madhav. Srishti is the elder child of Alchemist ARC promoter Alok Dhir. Darwin Projects could not be reached.

“Both bids are on the condition that the project will receive environmental clearance that has been the main reason this account turned into an NPA. It makes them weak. Creditors will consider them but the conditional nature and huge haircut make the bids unattractive in the present form,” said one of the three persons cited above.

Darwin has bid Rs 750 crore while the Dhirs have bid Rs 550 crore, which means the bids are at 88% and 91% haircuts, respectively. The upfront cash offered by both bidders is less than Rs 100 crore, making it less attractive for creditors.

ET’s queries to Lavasa’s Insolvency Resolution Professional (IRP) Shailesh Verma remained unanswered.

Lenders met on Wednesday to consider the bids and are most likely to ask both bidders to reconsider their conditions, put more cash on the table and compress their future payment timelines after taking views of other lenders in the coming days.

Union Bank of India (UBI) is the lead lender in the project with an outstanding loan of Rs 600 crore. Other lenders include Bank of India, Axis Bank, Punjab National Bank and State Bank of India. L&T Finance, the NBFC from the engineering to IT L&T group, is also a creditor along with asset reconstruction companies Arcil, Edelweiss, and Acre.

Lenders have been frustrated with the multiple pullbacks by bidders since the account was taken to the National Company Law Tribunal (NCLT) in 2018.

In November last year, ET reported that three bids were being considered including one from a Pune-based realty developer Anirudh Deshpande and a Dubai-based fund. Before that, Haldiram Snacks and Oberoi Realty had bid in late 2019, but pulled back later citing uncertainties due to the Covid 19 pandemic.

Lenders do not have high hopes from current bids. “Environmental clearance is the main deterrent for this project and until it gets resolved, things will not move,” a second person cited above said.

Srishti Dhir acknowledged the challenge facing the project but expressed confidence that she will be able to work with the authorities to sort things out. Besides completing the existing flats and villas, Dhir plans to also launch a hotel in the property in partnership with a reputed brand.

It remains to be seen whether creditors will want to settle this account through the NCLT as Lavasa is also earmarked to be sold to the National Asset Reconstruction Company (NARC).

Set up in 2000 by the Ajit Gulabchand-led Hindustan Construction Company (HCC), Lavasa was developing the country’s first privately developed city spread over 20,000 acres in Mulshi and Velhe areas in Maharasthra’s Pune district.



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About Rs 6.19 lakh crore Indian banks’ loans at climate change risks, BFSI News, ET BFSI

Banking & Finance

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The United Nations has flashed the Code Red signal on climate change for humanity with serious warnings for India. The recent floodings and landslides have also underscored the risk of climate change for the Indian industry and that banks that lend to them.

About Rs 6.19 lakh crore of debt at India’s leading financial institutions was at risk from extreme weather events such as droughts, floods and cyclones, according to non-profit CDP that has been lobbying banks to measure and disclose the risk climate change may pose to their portfolio.

The organisation has reached the figure based on information provided by some of the biggest lenders, including the State Bank of India and HDFC Bank.

The reason

Indian banks need to plan for a transition for a cleaner future even though they may be locked into funding coal projects for the near term. That’s because the government is still trying to do coal auctions and the industry is still reliant on coal. A lot of the iron and steel and the heavy industry use coal as a fuel. The encouraging sign is that the government has also initiated a plan for green hydrogen, according to CDP. Banks need to look at these newer technologies, newer methods of fuel substitution. All these things require policy support and public capital.

Bank initiatives

State Bank of India is talking about agriculture and allied agri-activities, HDFC Bank has done a scenario analysis in five states on agriculture, flooding and it’s its portfolio in sectors such as steel, cement, power, oil and gas.

SBI, which is facing concerns from shareholders and investors over its proposal to help fund the controversial Carmichael coal mine in northern Australia, valued its total climate risk at Rs 3.83 lakh crore. The bank said it may “indirectly face reputational risks, should it be involved in lending to environmentally sensitive projects which may have significant public opposition.”

SBI has tied up with the European Investment Bank to jointly pump Euro 100 million in equity financing into Indian small businesses focused on climate change and sustainability.

SBI already invests in a vehicle called Neev Funds for its impact investing objectives, and the two entities have created ”Neev Fund II” for taking ahead this partnership. This is one of the EIB’s first private equity investments in India.

Reserve Bank of India

The Reserve Bank of India (RBI) has been talking about green finance for many years and has taken various steps towards it. It has pushed, on the lines of corporate social responsibility for private companies, the concept of Environmental, Social and Governance (ESG) principles into financing aspects. In April this year, the RBI joined the Network for Greening the Financial System (NGFS) in April 2021. The NGFS, launched in December 2017 at the Paris One Planet Summit, is a group of central banks and supervisors from across the globe to share the best practices and contribute to the development of the environment and climate risk management in the financial sector. It is an institutional yet voluntarily membership, which will also help mobilise mainstream finance to support the transition toward a sustainable economy.

The status

India is the only major economy to not have a net-zero emissions target now, even China has a net-zero target. You need If India wants to be net-zero on emissions by 2050, on a broad calculation, its need to have 50% reduction by 2030, according to CDP. This is the action of the decade on climate change and if the opportunity is missed in this decade, it may be too late, it said, according to an S&P Global report.

UN climate change warning

The Indian Ocean is warming at a higher rate than other oceans, the latest report by the Intergovernmental Panel on Climate Change said on Monday, with scientists warning that India will witness increased heatwaves and flooding, which will be the irreversible effects of climate change.

For a country like India, some of the increase in heat waves is masked by aerosol emissions, and reducing that is important for air quality. We will also see an increase in the heatwaves, heavy rainfall events, and the further melting of glaciers, which will impact a country like India, more compound events from sea-level rise, which could mean flooding when tropical cyclones hit. These are some of the impacts which will not go away,” Friederike Otto, one of the authors of the report, said.



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10 banks come together to set up Secondary Loan Market Association

Banking & Finance

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Ten major banks, including State Bank of India (SBI), ICICI Bank, Canara Bank and Standard Chartered Bank (SCB), have come together to set up the Secondary Loan Market Association (SLMA). It is aimed at promoting the growth of the secondary market for loans in India and also create an online platform for this purpose.

SLMA is a self-regulatory body and has been formed as per the recommendation of the Reserve Bank of India’s Task Force on the Development of secondary market for corporate loans.

Wanted: A secondary market for bank loans

The other members of SLMA are Kotak Mahindra Bank, Deutsche Bank, Bank of Baroda, Punjab National Bank, Axis Bank and HDFC Bank.

As per SLMA’s memorandum of association, it will facilitate, promote and set up an online system for the standardisation and simplification of primary loan documentation, and standardisation of documentation for the purchase and sale/assignment documentation and other trading mechanisms for the secondary loan market and its documentation.

Website, logo, launched

SLMA will also develop and promote standard trading, settlement and valuation procedures and practices and rules and timelines for the members for conducting the business and to fix transaction-related charges.

The company’s website and logo were digitally launched on August 11, 2021, by Saurav Sinha, Executive Director, Reserve Bank of India.

Bonding together

Sinha said an active secondary market for loans in India will offer benefits to various stakeholders by way of capital optimisation, liquidity management, risk management, exposure re-balancing and efficient price discovery mechanism.

He observed that since smaller banks are generally constrained for various reasons from participating in large and creditworthy lending exposures at the time of origination, the secondary market can enable them to participate in such exposures at a later stage and the constraints faced under the Large Exposure Framework will be a thing of the past.

Sinha also laid stress on the essential pre-requisites for a vibrant secondary market — an ecosystem of market intermediaries like facility agents, security trustee, arrangers, valuation agencies, etc.

Expanding the spectrum of investors

Ashwini Bhatia, Managing Director, SBI, noted that the conceptualisation and operationalisation of SLMA in a time-bound manner is an appropriate response to the long-felt need for wider participation in the loan market aided by appropriate risk mitigation. It will provide the banks and other participants a window for managing their loan assets portfolio, he added.

Bhatia underscored that presently, the primary and secondary markets are restricted to banks and non-banking finance companies and domestic and foreign investors participate only in distressed debt through Asset Reconstruction Companies.

“As such, there is a felt need to expand the spectrum of investors in the secondary market and Alternative Investment Funds/Mutual funds to invest in the secondary loan market,”he said.

Sanjay Srivastava, Chairman, SLMA, said the secondary market for loans in India will evolve on the strength of a systematic digital loan trading platform, standardisation of documents, active participation by stakeholders and effective price discovery mechanism.

Sunil Mehta, Chief Executive, Indian Banks’ Association (IBA), said currently the IBA is actively working on development of syndicated loan market in India and one of the key success factors for such market will be the parallel development of secondary market for sale of loan.

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Corporates prepay loans, shrink banks’ loan books, BFSI News, ET BFSI

Banking & Finance

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Corporates that are flush with cash on account of booking bumper profits are looking to deleverage their bank loans and prepaying them.

HDFC Bank has received Rs 30,000 crore in prepayments through the Jue quarter, mainly from companies in the commodities and infrastructure sectors.

For companies that have run loans for more than two years, there is no prepayment penalty for business loans.

In the April-June quarter, AAA or AA-rated companies sought to deleverage as they recorded solid cash balances. Cash flows were robust at commodity companies because of record iron ore or aluminium prices, boosting net profits. Infrastructure companies, too, reported fatter bottom lines due to the government’s extensive highway-building programme.

With demand collapsing during pandemic and uncertainty rising, companies had put a pause on expansion and have focused on becoming debt-free.

PSU loan books shrink

The deleveraging has led to a drop in corporate loan demand for banks, especially PSU ones.

The domestic corporate loans by the State Bank of India fell 2.23 per cent to Rs 7,90,494 crore in the quarter ended June 30, 2021, compared to Rs 8,09,322 crore in the same quarter last year. In the first quarter of FY21, SBI reported 3.41 per cent growth in corporate advances.

Union Bank of India‘s share of industry exposure in domestic advances dropped to 38.12 per cent at Rs 2,40,237 crore from 39.4 per cent at Rs 2,47,986 crore in the same quarter a year ago. Corporate loans dropped 3% at Indian Bank during the last quarter. At PNB, corporate loans fell 0.57 per cent at Rs 3,264,66 crore in June quarter 2021 compared to Rs 3,28,350 crore a year ago.

Up to May, the gross loans to large industries declined by 1.7 per cent year­-on­year, according to RBI data.

However, HDFC Bank expanded its corporate loans over 10% in the April-June quarter to about Rs 3.15 lakh crore.

Shift to bonds

The corporate world focused on deleveraging high-cost loans through fundraising via bond issuances despite interest rates at an all-time low. This has led to muted credit growth for banks.

Corporates raised Rs 2.1 lakh crore in the December quarter and Rs 3.1 lakh crore in the fourth quarter from the corporate bond markets. In contrast, the corresponding year-ago figures were Rs 1.5 lakh crore and Rs 1.9 lakh crore, respectively.

Bonds were mostly raised by top-rated companies at 150-200 basis points below bank loans. Most of the debt was raised by government companies as they have top-rated status.

For AAA-rated corporate bonds, the yield was 6.85 per cent in May 2020, which fell to 5.38 per cent in April 2021 and to 5.16 per cent in May 2021.



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SBI, BFSI News, ET BFSI

Banking & Finance

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The State Bank of India on Tuesday said there’s a need to jump start domestic consumption for India to achieve sustained growth even as export growth shows a definitive uptick.

It said for the 18 year period ended FY21, the weighted contribution of exports was 28% and of consumption was 69% while for the seven-year period ended FY21, their weighted contributions were 7% and 71%, respectively.

“It has to be kept in mind that primary engine of growth for India remains domestic consumption and unless that improves it is difficult for India to achieve sustained growth,” said Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI.

Among export sectors, it said ships and boats, aircrafts and ceramics have potential and focus on these can yield positive result.

Led by engineering goods, petroleum products, gems & jewellery, textiles and garments and organic & inorganic chemicals, India’s merchandise exports in April-July were $130.53 billion, up 73.51% over $75.22 billion in the year ago period and up 21.82% over $107.15 billion in the same period in 2019-20.

As per the report, the biggest contribution to exports has been of petroleum products- 1.5% in FY97, 21% in FY14, 9% in FY21 and recovered to 14% in the current fiscal.

Stating that the impact of international crude oil prices has always been a big factor in the way India’s crude oil exports, SBI said as the world slowly moves towards cleaner sources of fuel, India needs to chart a plan to gradually bring its share down.

“This can only be possible if other manufactured exports improve,” the bank said.

While chemicals and pharmaceuticals, electrical and mechanical machinery and appliances, vehicles, articles of iron and steel, plastics have grown “fairly steadily” and increased their share in the overall exports, Ghosh said there is no big segment which has shown such growth as petroleum sector had done in the past.

Over the years, certain agri based and labour intensive products like residues and wastes from food industries, animal fodder, coffee, tea, mate and spices, carpets and footwear have exited the export list whereas aluminium and its articles, ships, boats and floating structures exports have grown rapidly and are now part of the top exports, according to the report.

Similarly, furskins and artificial fur, arms and ammunition, furniture, aircraft and space craft and zinc and its articles have shown rapid growth but their share in overall exports is still very low as they started from a very low base.



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Banks report improved NII, lower NPA provisioning in Q1, BFSI News, ET BFSI

Banking & Finance

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The provision for cumulative non-performing assets (NPA) by banks softened in the June 2021 quarter after a spike in the previous quarter when they resumed accounting for slippages after RBI’s schemes to defer the recognition of actual NPAs ended in December. For a sample of 28 banks, the loan loss or NPA provision fell by 6.8% year-on-year and 43.8% sequentially to Rs 36,805.4 crore in the June quarter.

The aggregate provision by the public sector (PSU) banks fell by 27% year-on-year due to a sharp double digit drop reported by State Bank of India, Punjab National Bank, Canara Bank, and Bank of Baroda. On the other hand, private sector banks reported 51% jump following a sharp increase reported by HDFC Bank, Kotak Bank, Bandhan Bank and RBL Bank. As a result, their share in the total NPAs increased to 42.5% from 26.1% in the year-ago quarter.

The total sample’s net interest income (NII) increased by 4.8% year-on-year to Rs 1.2 lakh crore. A majority of the banks, 20 to be precise, reported higher net interest from the year-ago level. The share of the private banks in the sample’s net interest expanded to 43.8% from 41.7% a year ago.

The sample’s cumulative COVID provisioning increased to Rs 34,641.5 crore in the June quarter from Rs 29,892.8 crore in the previous quarter. Here, the share of PSU banks increased to 34.7% from 26.7% sequentially.

June ’20 September ’20 December ’20 March ’21 June ’21
Loan loss provision (Rs crore) 39504.8 33896.1 28828.5 65542.2 36805.4
Loan loss provision (YoY % change) -17.0 -11.0 -59.6 19.5 -6.8

Share of PSU banks in quarterly provisioning (%)

June ’20 September ’20 December ’20 March ’21 June ’21
PSU share (%) 73.9 77.5 63.7 66.4 57.5
Non-PSU share (%) 26.1 22.5 36.3 33.6 42.5

Data for a sample of 28 banks. Source: Bank data, ETIG



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Banks to DoT, BFSI News, ET BFSI

Banking & Finance

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Conversion of debt of the stressed telecom player Vodafone Idea Ltd (VIL) into equity could be an option to emerge out of the crisis, lenders led by State Bank of India (SBI) have suggested to Department of Telecommunications (DoT). DoT had called senior bank officials on Friday to discuss the stress in the telecom sector arising out of the Supreme Court order last month on the adjusted gross revenue (AGR)-related dues payable by telecom majors, including Vodafone Idea and Bharti Airtel, sources said.

The top court has given a time period of 10 years to telecom service providers struggling to pay Rs 93,520 crore of AGR-related dues to clear their outstanding amount to the government.

Bankers also told senior DoT officials that conversion of debt of VIL into equity is an option but not a sustainable one, sources said, adding that since VIL had not defaulted on its debts so far, they cannot take any action yet.

In a bid to keep a company a going concern, banks have used the option of converting debt into equity in many stress cases in the past.

Capital infusion by promoters is the best option in the given scenario, sources said quoting bankers.

The UK-based Vodafone has a 45 per cent stake while Aditya Birla Group owns a 27 per cent stake in the VIL.

Lenders, both public and private, stare at a loss of Rs 1.8 lakh crore in case VIL collapses. A large part of the loans to the lender is in the form of guarantees with public sector banks having a lion’s share of the debt.

Among the private sector lenders, Yes Bank and IDFC First Bank may be impacted the most. As a precursor, some private lenders with a funded exposure have already started making provisions.

For example, IDFC First Bank has marked the account of VIL as stressed and has made provisions of 15 per cent ( Rs 487 crore) against the outstanding exposure of Rs 3,244 crore (funded and non-funded).

“This provision translates to 24 per cent of the funded exposure on this account. The said account is current and has no overdues as of June 30, 2021,” the lender had said in its Q1 FY’22 investor presentation, referring to the account as “one large telecom account”.

According to official data, VIL had an AGR liability of Rs 58,254 crore out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

The company’s gross debt, excluding lease liabilities, stood at Rs 1,80,310 crore as of March 31, 2021. The amount included deferred spectrum payment obligations of Rs 96,270 crore and debt from banks and financial institutions of Rs 23,080 crore apart from the AGR liability.

In a backdrop of such large liabilities, both the promoter Vodafone (45 per cent stake) and Aditya Birla Group (27 per cent stake) expressed their inability to bring in additional capital.

Writing a letter to Cabinet Secretary Rajiv Gauba in June, Aditya Birla Group Chairman Kumar Mangalam Birla said investors are not willing to invest in the company in the absence of clarity on AGR liability, adequate moratorium on spectrum payments and most importantly floor pricing regime being above the cost of service.

“It is with a sense of duty towards the 27 crore Indians connected by VIL, I am more than willing to hand over my stake in the company to any entity-public sector/government /domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern,” Birla said in the letter.

Birla has quit the post of non-executive chairman post of the floundering telecom giant last week. PTI DP ANZ ANS ANS



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Public sector banks’ corporate loans decline in Q1 as Covid, competition hurt, BFSI News, ET BFSI

Banking & Finance

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Lending to the corporate sector by public sector banks declined significantly in the first quarter as Covid kept the demand depressed and competition from private sector banks and the bond market rose.

The domestic corporate loans by the State Bank of India fell 2.23 per cent to Rs 7,90,494 crore in the quarter ended June 30, 2021, compared to Rs 8,09,322 crore in the same quarter last year. In the fi rst quarter of FY21, SBI reported 3.41 per cent growth in corporate advances.

Union Bank of India‘s share of industry exposure in domestic advances dropped to 38.12 per cent at Rs 2,40,237 crore from 39.4 per cent at Rs 2,47,986 crore in the same quarter a year ago. Corporate loans dropped 3% at Indian Bank during the last quarter. At PNB, corporate loans fell 0.57 per cent at Rs 3,264,66 crore in June quarter 2021 compared to

Rs 3,28,350 crore a year ago.

Up to May, the gross loans to large industries declined by 1.7 per cent year­-on­year, according to RBI data.

Ceding ground of private-sector rivals

The market share of public sector banks in loans declined to around 59 per cent (of all scheduled commercial banks’ outstanding credit) in December 2020 against around 65 per cent in December 2017.

However, during this period, PvSBs market share rose to around 36 per cent from around 30 per cent, going by Reserve Bank of India data.

Falling industrial credit

The share of banks in loans to the industrial sector dropped massively during 2014-2021 even as credit to the retail sector, including home loans, saw a boom.

As per the data, industrial credit fell to 28.9% by March 2021 from 42.7% at the end of March 2014.

“Over recent years, the share of the industrial sector in total bank credit has declined whereas that of personal loans has grown,” the Reserve Bank of India said in its Financial Stability Report.

The environment for bank credit remains lacklustre in the midst of the pandemic, with credit supply muted by persisting risk aversion and subdued loan demand and within this overall setting, underlying shifts are becoming more evident than before, it said.

Loans to the private corporate sector declined from 37.6% in 2014 to 27.7% at the end of March 2021. During the same period, personal loans grew from 16.2 to 26.3%, in which housing loans grew from 8.5% to 13.8%.

Fiscal 2021

Bank credit growth to the industrial sector decelerated 0.8% year-to-date as of May 21, 2021, due to poor loan offtake from the corporate sector.

Growth in credit to the private corporate sector, however, declined for the sixth successive quarter in the fourth quarter of the last fiscal and its share in total credit stood at 28.3 per cent. RBI said the weighted average lending rate (WALR) on outstanding credit has moderated by 91 basis points during 2020-21, including a decline of 21 basis points in Q4.

Overall credit growth in India slowed down in FY21 to 5.6 per cent from 6.4 per cent in FY20 as the economy was hit hard by Covid. and subsequent lockdowns.

Credit growth to the industrial sector remained in the negative territory during 2020-21, mainly due to the COVID-19 pandemic and resultant lockdowns. Industrial loan growth, on the other hand, remained negative during all quarters of 2020-21.”

The RBI further said working capital loans in the form of cash credit, overdraft and demand loans, which accounted for a third of total credit, contracted during 2020-21, indicating the impact of the coronavirus pandemic.

Shift to bonds

The corporate world focused on deleveraging high-cost loans through fundraising via bond issuances despite interest rates at an all-time low. This has led to muted credit growth for banks.

Corporates raised Rs 2.1 lakh crore in December quarter and Rs 3.1 lakh crore in the fourth quarter from the corporate bond markets. In contrast, the corresponding year-ago figures were Rs 1.5 lakh crore and Rs 1.9 lakh crore, respectively.

Bonds were mostly raised by top-rated companies at 150-200 basis points below bank loans. Most of the debt was raised by government companies as they have top-rated status.

For AAA-rated corporate bonds, the yield was 6.85 per cent in May 2020, which fell to 5.38 per cent in April 2021 and to 5.16 per cent in May 2021.



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Banks set for higher provisioning hit as Vodafone Idea totters, BFSI News, ET BFSI

Banking & Finance

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Banks are going for higher provisioning for the Vodafone Idea account even as the future of the company hangs by a thread.

IDFC First Bank has marked the account of VIL as stressed and has made provisions of 15 per cent (Rs 487 crore) against the outstanding exposure of Rs 3,244 crore (funded and non-funded).

“This provision translates to 24 per cent of the funded exposure on this account. The said account is current and has no overdues as of June 30, 2021,” the lender said in its Q1 FY’22 investor presentation, referring to the account as “one large telecom account”.

According to official data, VIL had an adjusted gross revenue (AGR) liability of Rs 58,254 crore out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

The company’s gross debt, excluding lease liabilities, stood at Rs 1,80,310 crore as of March 31, 2021. The amount included deferred spectrum payment obligations of Rs 96,270 crore and debt from banks and financial institutions of Rs 23,080 crore apart from the AGR liability.

More banks may go for provisioning in the next couple of quarters for the account as troubles mount for the company.

Discussions with banks

The Department of Telecommunications (DoT) has initiated discussions with banks to address financial stress in the telecom sector, particularly Vodafone Idea Ltd (VIL) that urgently requires fund infusion to stay afloat.

There was a meeting of DOT officials and senior bankers on Friday on the issue of Vodafone, sources said, adding that banks have been asked to look for a solution within the prudential guidelines.

According to sources, senior officials from the country’s biggest lenders State Bank of India and Bank of Baroda were also present among others in the meeting.

More such meetings are expected to take place in the coming days, they said.

Meanwhile, the finance ministry has asked public sector banks to collate and submit data related to their debt exposure to the telecom sector in general and VIL in particular.

Lenders, both public and private, stare at a loss of Rs 1.8 lakh crore in case VIL collapses. A large part of the loans to the lender is in the form of guarantees with public sector banks having a lion’s share of the debt. Among the private-sector lenders, Yes Bank and IDFC First Bank may be impacted the most. As a precursor, some private lenders with a funded exposure have already started making provisions.

Promoters in bind

In a backdrop of such large liabilities, both the promoter Vodafone Plc (45 per cent stake) and Aditya Birla Group (27 per cent stake) expressed their inability to bring in additional capital.

Writing a letter to Cabinet Secretary Rajiv Gauba in June, Aditya Birla Group Chairman Kumar Mangalam Birla said investors are not willing to invest in the company in the absence of clarity on AGR liability, adequate moratorium on spectrum payments and most importantly floor pricing regime being above the cost of service.

“It is with a sense of duty towards the 27 crore Indians connected by VIL, I am more than willing to hand over my stake in the company to any entity-public sector/government /domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern,” Birla said in the letter.

Birla has quit the post of non-executive chairman post of the floundering telecom giant last week.

Giving relief to Vodafone on one front, the government has proposed to withdraw all back tax demands on companies with passage of ‘The Taxation Laws (Amendment) Bill, 2021’.



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