Are banks in safe territory post 2G verdict?

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Are banks in safe territory post 2G verdict?

The Supreme Court's verdict of cancelling 122 telecom licences badgered banking stocks on fears that loans to telcos wont be repaid. But the day the order after bankers, rating agencies and the banking secretary say the holes , if any will be small, reports CNBC-TV18’s Gopika Gopakumar.

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Excerpts from India Business Hour on CNBC-TV18 Watch the full show »

The Supreme Court's verdict of cancelling 122 telecom licences badgered banking stocks on fears that loans to telcos wont be repaid. But the day after the order bankers, rating agencies and the banking secretary say the holes , if any will be small, reports CNBC-TV18's Gopika Gopakumar.

The banking system is not dented much even though the Supreme Court has cancelled the licences of 11 telecom companies. That is the assurance from the government and rating agencies.

According to the banking secretary, total exposure of banks to telecom companies with cancelled licences is around Rs 10,000 crores. Of this only Rs 1,000 crores is at risk, Rs 7,500 crores is backed by non telecom collateral. Of the balance Rs 2,500 crores, some of the loans are to strong telecom companies like Idea and Tata Tele .

Rating agencies too agree that the banks' exposure to these 11 telecom companies is small. Ananda Bhoumik of Fitch Ratings said, "We are assuming in a stress case, even if banks have to write off part of principal, I don't think in itself this is going to cause us to rerate assuming that banks lose 40-50% of the exposure."

All big bankers have also allayed fears of any major hit arguing that most of their loans are backed by corproate guarantees from the parent groups or to running telcos like Idea and Tata Tele that can services their loans easily.

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