Banks will have to face provisioning pressure of at least Rs 25,000-30,000 crore in the March quarter as most of the cases where inter-creditor agreement (ICA) were signed remain unresolved, sources in banks told FE. Additionally, the lenders will have to continue providing in big ticket size cases like Dewan Housing Finance Corporation (DHFL), as per provisioning norms of Reserve Bank of India (RBI), source added. The banks had signed inter-creditor agreements worth more than Rs 2 lakh crore, under Reserve Bank of India circular to resolve cases outside court. Since most of the cases remain unresolved, banks will have to make additional 20% provisioning as no resolution could be reached in 210 days period after signing ICA, as per circular. The only way to reverse provisioning is to refer accounts to National Company Law Tribunal (NCLT). It is very unlikely that banks will be able to refer all cases to NCLT as they do not want to lose any chance to resolve the cases, a senior banker told FE.
In big ticket size cases like DHFL, which is already undergoing resolution at NCLT, banks had made provisioning of around 15% of total exposure in December quarter. Financial creditors have around Rs 41,000 crore exposure in DHFL. Experts believe banks will have to continue making 15% more provision in March quarter for the mortgage lender as per master circular of RBI on prudential norms on income recognition, asset classification and provisioning pertaining to advances. Similarly in the cases like Suzlon where restructuring of Rs 12,785 crore debt is underway, banks had decided to take additional provisioning of 20%. The banks were also trying to resolve Anil Ambani-led Reliance Home Finance, which had total debt of Rs 11,995 crore to financial creditors. Since, no success has been met in resolving home financier, banks have to make necessary provision in the March quarter. In the same fashion, lenders will have to make provision for accounts like Cox & Kings, Jain irrigation, Coffee Day Enterprises (CCD), Simplex Infra, CG Power among others, as no resolution had been arrived at yet.
Altico Capital is one of the few accounts where banks are hopeful of resolving soon. Lenders are likely to vote on bids of SSG Capital and private equity firm Cerberus Capital on March 12. However, with only a few days remaining in March quarter, banks may need to continue providing for the NBFC account.
The only recovery for banks may be in the form of money coming from resolution of Bhushan Power & Steel and Reliance Communications. The National Company Law Appellate Tribunal (NCLAT) on February 18 paved the way for lenders to recover Rs 19,700 crore from the chosen bidder JSW Steel by rejecting the Enforcement Directorate’s (ED) plea for right to attach the assets of Bhushan Power and Steel (BPSL). The banks are expecting to receive money from JSW Steel in March.
Similarly the committee of creditors (CoC ) of Reliance Communications approved Rs 23,000 crore total bid of UVARC and Reliance Jio for different assets of the company. However, NCLT is yet to give final approval for the same.
Source- Financial Express.