Saikat Das
Moneycontrol.com
Asset quality concerns continue to haunt the Indian banking industry. The total amount of restructured loans during 2011-12 and 2012-13 is expected to be at around Rs 2 lakh crore (Rs 2 trillion) with a significant portion from large-sized corporate entities, stated Crisil Ratings in a report released on Tuesday.
At the same time, banks' gross non-performing assets are set to increase to 3.2% by March, 2013 as against 2.9% recorded in December, 2011.
"The large quantum of restructuring reflects the prevailing stress on corporate India's credit quality because of lower profitability, weak demand and tight liquidity. Sectors with large debt are particularly vulnerable to restructuring. Nearly 30% of the restructuring is expected in the power sector," Crisil said.
In the last one year, banks were struggling to arrest rising loan defaults. It led to the erosion of their profit margins on higher provisioning against non-performing loans. Public sector banks were the worst hit while their private sector peers showed some resilience. However, bankers do not fully endorse the Crisil's view on asset quality. On the contrary, they see a better picture going forward.
"The overall situation of banks' asset quality should improve in FY13," Harish Engineer, Executive Director,
HDFC Bank told
Moneycontrol.com.
"Indian economy looks a bit better than the previous year. The estimate for restructuring cases may be an outcome of some big defaults in the recent time. We do not expect any problem from large corporates. The only hurdle is the lack of overseas investment flows. The government should take some action to ensure this. We are getting encouraging response from large companies in our project finance business, launched six months back," he said.
In the last 12-18 months, debt ridden companies like
Kingfisher Airlines (around Rs 7,000 cr debt with lenders),
GTL Infrastructure (around Rs 16,200 cr) and Air India (Rs 40,000 cr) and
Hindustan Construction Company (Rs 7,820 cr restructured debt) failed to repay loans taken from various banks. Consequently, they were referred to Corporate Debt Reconstruction cell, an official platform for both the creditors and borrowers to amicably and collectively evolve policies for working out debt restructuring plans.
"With our existing large corporate clients, we do not expect any ugly surprise in the current year. Even if any big company goes for restructuring, it will come out of it successfully due to its strong fundamentals. We are not worried on our expsoures," said Santosh Nair, Deputy Managing Director,
State Bank of India.
Some other disturbing sectors, according to Crisil, include aviation, construction, engineering, steel, textiles, and telecom infrastructure. Loans of Rs.75,000 crore were either restructured or their restructuring was underway during nine months ended December 2011.
"In the current phase, the loans being restructured are large corporate exposures; over two-thirds of the loans restructured till December 2011 had ticket size of over Rs.10 billion, reflecting a high level of concentration," Ramraj Pai, president, Crisil Ratings said in a release.
The Crisil report also pointed out that the increase in NPAs reflects the expectation of slippages in the agriculture and SME portfolio. However, any significant reduction in estimated GDP of 7% for FY13 could worsen the gross NPA scenario.
"I do not expect the level of non-performing assets to go up," said S S Mundra, Executive Director,
Union Bank of India.
"In 2011-12, most of the NPAs have been recognized by banks and taken into the computer driven system. Lenders have intensified recovery efforts too. It is yielding good results as well. In the current fiscal, the asset quality is likely to improve. However, the restructuring cases may keep on adding. A loan account does not need to be a non-performing asset at the time of CDR referral."
saikat.das@network18online.com 
