S4A should also consider under-progress projects: IDBI Bank

Speaking to CNBC-TV18 GM Yadwadkar, DMD, IDBI Bank said under the S4A only completed projects are covered. Under-implementation projects aren't covered, he said. 

Yadwadkar also commented on how there have been suggestions from lenders on taking the one-year forward earnings of companies while counting in the sustainable part of the debt. “A 6-month period is too short a time and it presupposes that the current depressed scenario will continue for ever.”Below is the transcript of GM Yadwadkar’s interview to Latha Venkatesh on CNBC-TV18.Q: If these two provisions are allowed that you are allowed a 5:25, extend the sustainable loan to a longer period and amortise your losses over a longer period, will this mean more schemes will go through?A: Yes, of course. These are some of the suggestions which the lenders have done. Plus of course, a couple of more suggestions which we had given is that presently it is restricted only to the completed projects. So, the projects under implementation are not covered by these guidelines. Maybe one needs to have a look at such projects also which are not good in numbers.Q: Are there some suggestions about taking one year forward earnings while counting sustainable debt?A: Exactly, because six months period is too short a period and that pre-supposes that the current depressed scenario will continue forever, which probably should not be the case. A couple of more points is about the provisioning requirement. Of course, talk has been there that the sustainable portion will be treated as standard, but presently, as per the guidelines, at least 20 percent provision, we have to make on the sustainable portion. Plus, we have to provide on the convertible instruments whether it is equity or whether it is Compulsory Convertible Debenture (CCD), etc. So, that in effect is significantly higher compared to a non-performing assets (NPA) account.Q: So you are asking for a longer period to provide it? How many quarters? Do you want 12 quarters?A: It is not a specific number, which is mentioned, but Reserve Bank of India (RBI) can take a call on an overall basis as to how much time could be permitted.Q: What is your sense? With these, are you expecting some projects to go through assuming these are agreed on by the RBI?A: Yes, because presently only handful of projects were under discussion, but if these types of amendments come, probably it may cover a whole number of cases and lenders can take a considered call as to whether to cover it under S4A or otherwise.Q: You are meeting the RBI shortly?A: No, the suggestions have gone from the Indian Banks’ Association (IBA) side. IBA had been co-ordinating with all the banks and they are being discussed through IBA.