SBI, Indian Bank top lenders in Rs 4,300 cr debt recast

Saikat Das
Moneycontrol.com

State-owned lenders continue to grapple with asset quality problems. The State Bank of India (SBI) and Indian Bank emerged as the top two lenders in the latest two loan restructuring cases at about Rs 4,300 crore including Bhubaneswar based Visa Steel (at Rs 2,540 crore) and Mumbai-based Varun Industries (at Rs 1,755 crore).

In a consortium of 18 lenders, SBI has the highest credit exposure of around Rs 600 crore followed by Corporation Bank at Rs 200 crore in Visa Steel debt restructuring. Similarly, south-based Indian Bank loaned Rs 369 crore in an 11 banks led syndicate that lent to troubled Varun Industries. The United Bank of India is second largest lender with Rs 292 crore loans, a banker with the direct knowledge of the development told Moneycontrol.com requesting anonymity.

Both the cases have been referred to the Corporate Debt Restructuring (CDR) cell, a platform to sort out loan defaults jointly, in May. Restructuring is the process when a borrower fails to make timely repayment of loans and approaches its lenders to dilute its original terms under which the loan was sanctioned.

"Those two cases are under flash stage, the first step of restructuring. Varun Industries was admitted in the CDR forum on June 1 while talks are on to admit the case of Visa Steel," said a source. 

Interestingly, the share of private banks in those restructuring cases is insignificant as compared to their public sector peers.

In FY12, Varun Industries reported a net loss of Rs 158 crore as against a net profit of Rs 39 crore in FY11. During the same period, Visa Steel too recorded a net loss of Rs 119 crore compared to a net profit of Rs 51 crore a year ago.

Even though the worst may be over for banks' asset quality, according to bankers, the stress has not yet eased.

"The worst is over for bad loans. However, nobody knows the future especially in an uncertain time. In 2012-13, we may see two-three more big accounts coming under stress. As on date, they are all performing assets. Later, they may have to be referred for restructuring," Santosh Nayar, Deputy Managing Director (Corporate Banking Group), SBI had told Moneycontrol.com earlier.

saikat.das@network18online.com