Bad debt under the corporate debt restructuring (CDR) scheme allowed by the Reserve Bank of India (RBI) has reached a high of Rs 12,203 crore in the January-March quarter.

In all 20 companies, including mid-sized firms in micro-finance, retail, textile and pharmaceutical sectors, were admitted for debt restructuring, and MFIs accounted for most of the bad debt at Rs 8,084 crore. A year ago, only Rs 4,881.91 crore of debt came up for restructuring.

In the past five years, the highest quantum of bad debt that was restructured in a quarter was Rs 7,900 crore in the second quarter of 2009-10.

Rating and research firm Crisil estimates that non-performing assets in the banking system will continue to rise to touch 3 per cent of gross advances by March 2012.

Pawan Aggarwal, head of ratings at Crisil, said, “Financial stress would be visible in companies in the textile sector that were over-leveraged, retail companies that took on their books a large amount of debt for expansion, companies whose profitability is under attack due to rising input costs and high interest rates and those companies that are implementing projects.”

Of the 20 firms, six MFIs and four textile retail chains have built up the largest portfolio of non-performing assets, with retail chains bringing over Rs 1,000 crore of debt for restructuring.

Banks have already decided to bunch together all MFI loans for restructuring. Though SKS Microfinance was also part of the initial plan, it pulled out after the company managed to raise fresh funds.

SKS CFO Dilli Raj told Financial Chronicle, “We wrote to the consortium of banks to exclude us from the CDR mechanism as we had sufficient resources for repayment.”

While SBI Caps is restructuring Rs 662.20 crore of debt of Koutons Retail, other textile retail chains that have come under CDR are Gini & Jony and Orient Clothing.

Private lenders such as HDFC Bank and Axis Bank have lent Rs 50 crore each to the company, and the remaining bankers to the company are from the public sector.

“Textile retail chains continue to bleed as the downturn in the economy has led to a build up of stocks. As fashion keeps changing, companies find it difficult to offload the stock,” said a senior banker.

Ankur Drugs and Pharma is also getting its debt of Rs 982.63 crore restructured during the quarter. The lead bank for the exercise is the State Bank of India.

Though the total corporate debt that has come for restructuring in the financial year 2010-11 at Rs 22,010.16 crore is less than the previous financial year’s Rs 22,273.40 crore, the surge in the previous quarter is raising concern about deteriorating asset quality of banks.