Rating agency Crisil has said loans restructured by Indian banks may increase sharply to Rs 3.25 lakh crore between 2011-12 and 2012-13, against its earlier estimate of Rs 2 lakh crore.
Major restructuring will be on loans to state power utilities (SPUs), the construction and infrastructure sectors. The rise is the result of significantly higher funding challenges being faced by companies with large debt.
Pawan Agrawal, Senior Director, Crisil Ratings, said: “In recent months, the availability of unsecured short-term loans from Indian banks has diminished. This is exacerbating refinancing and liquidity pressure, especially for the SPUs. This will lead to a significant increase in restructuring of SPU loans to nearly Rs1.5 lakh crore. So far, SPU loans of Rs 60,000 crore have been restructured.”
Most likely SPU-loan restructuring will happen through a centralised scheme coordinated by the Government of India (GoI), he added.
“Furthermore, the inability to raise adequate equity in a timely manner is straining the balance sheets and financial flexibility of developers in infrastructure and construction sectors, resulting in increased likelihood of restructuring, he said.
Other vulnerable sectors include iron and steel, textiles, and engineering. The proportion of restructured loans in this period will be high at around 5.7 per cent of banks’ advances as on March 31, 2013.
Agrawal said around Rs 50,000 crore of these restructured loans may slip into NPAs, though this will depend on the terms of restructuring and the fundamental viability of the projects and the companies. These slippages can aggravate the already stressed asset quality of banks by further increasing NPAs by 50 to 75 basis points beyond March 2013.
The loans to SPUs are unlikely to slip into NPAs given the support expected from the States and Central Governments.