Mumbai: Bankers will gather at the State Bank of India (SBI) headquarters in Mumbai on Monday and Tuesday to discuss 10 large stressed cases, said two bankers in the know, requesting anonymity.
The meeting will also see some promoters from these large companies coming in to discuss further strategies and possible solutions to counter the stress, the bankers said. These are cases where action is crucial and where bankers will have to move quickly to prevent them from turning into non-performing assets.
“This is part of the JLF (joint lender forum) system and there are different time slots set for discussing each company over the two days. The meetings are being chaired by the SBI managing director for large companies," a senior public sector banker said, on condition of anonymity, as he is not allowed to be quoted in the press.
A large number of the cases being discussed are steel companies, said the first banker, adding that there is also an offshore company which requires its debt to be dealt with.
“Typically, general manager and chief general manager level officers go for these meetings, but we may see more senior bankers coming this time," said the first banker.
The second banker quoted above said that at the meetings, lenders will explore all available options, including an increase in promoter equity in these companies or even a change in management, if needed.
“The aim is to bring the debt to sustainable levels and also find a reasonable solution to ensure repayment," the second banker said.
On Monday, The Economic Times reported that a battery of bankers led by SBI and ICICI Bank is going to grill the top management of companies on their repayment and debt reduction plans.
The move is part of the Reserve Bank of India’s attempts to clean up bank balance sheets by March 2017. This entails banks recognizing stressed assets appropriately and providing for them. The process, which began during the December ended quarter, has already led to a spike in reported gross non-performing assets (NPAs) and provisions.
Gross NPAs of 39 listed banks surged to ₹ 4.38 trillion in the quarter ended 31 December 2015, from ₹ 3.4 trillion at the end of the September quarter, according to data collated by corporate database provider Capitaline.
In a statement last week, ratings agency Crisil Ratings had said that it expects stressed assets (a sum of gross NPAs and other troubled assets) in the Indian banking system to rise to over ₹ 7 trillion (or 11.3% of total loans) by March 2017, from about ₹ 4 trillion (7.2% of total loans) as on March 2015.
Crisil Ltd downgraded its ratings on the securities of eight public sector banks and changed the outlook on instruments of five other lenders to negative.
Over the next few quarters, the ratings agency expects slippages to NPAs in banks to remain high, driven by stretched cash flows of highly leveraged companies, continued proactive recognition of stressed assets by banks and the limited ability of banks in the current environment to recover exposure to large corporates that have slipped into NPAs.