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The year 2013 can easily be dubbed as the year of corporate debt restructuring, going by the value of loans that have come home to roost for restructuring in the year.
In the first eight months of 2012-13, as many as 72 cases involving a loan value of Rs 1,12,929 crore have been referred for restructuring before the corporate debt restructuring (CDR) cell, it is learnt.
The picture is worrisome if one were to compare it with the 2012-13 situation, when 128 cases involving a loan value Rs 91,229 crore were sought to be restructured. In 2011-12, as many as 86 cases involving Rs 77,660 crore came up for debt restructuring.
The main sectors that could be the reason for such high level of stressed assets in past two years are infrastructure, iron and steel, textile, aviation and mining. These five sectors accounted for 51 per cent of the total stressed assets of scheduled commercial banks (SCBs).
Infrastructure has clearly been the culprit and the main source of worry for commercial banks with this segment’s share in total stressed advances (of SCBs) surging from a level of 8.3 per cent in end March 2009 to about 30 per cent in end September 2013.
ASSET QUALITY CONCERNS As much as 10.2 per cent of scheduled commercial banks’ total advances were ‘stressed’ as at September end 2013. This is one percentage point higher than 9.2 per cent in end March this year.
While the gross non-performing assets (GNPA) ratio of SCBs increased to 4.2 per cent, as at September end 2013 from 3.4 per cent in March 2013, the restructured standard advances also increased to 6 per cent from 5.8 per cent.
The main factors affecting asset quality of SCBs adversely are current economic slowdown, policy logjam, delayed clearances of various projects and aggressive expansion by corporates during the high-growth phase.
SUBDUED INDIA INC Indian corporates have recorded subdued performance so far this fiscal, with net profits and even net profit margins contracting for most companies, especially in the second quarter. This is even as sales growth increased.
BETTER 2014 Financial year 2014-15 will be a good period for Indian banking, says a confident Rana Kapoor, Managing Director and CEO, YES Bank.
A fuller economic recovery is expected to begin taking shape from December 2014 — two quarters after the formation of a new Government, as the recent steps to clear various inter-sectoral logjams seep through, he says.
A dynamic political leadership would also facilitate a strong economic rebound.
“As the cycle turns, I believe banks will have a critical role to play in supporting the productive impulses of the economy while meeting the financial needs of all the sections of society.”
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