Banks have referred just Rs 13,000 crore to the CDR cell so far in the fourth quarter ending March 31, which is less than half of the Rs 31,000 crore debt lined up for CDR in the year-ago quarter. This simply means lenders are referring only those cases under this special dispensation, which have the best chance of recovery.
CDR is a special debt-restructuring process designed by RBI, where the borrower is allowed a longer repayment period extending up to 10 years along with a moratorium on interest payment. It also allows additional funding against a commitment from the borrower on cash flow from operations and disinvestment of non-core assets.
Soundara Kumar, deputy managing director in charge of stressed assets at the State Bank of India, said, “Banks are getting extra-cautious about such references, as projected cash flows are often doubtful. Only those cases where banks are certain about future growth prospects and revenue flows are coming for the special dispensation under CDR.”
Banks have turned cautious as many companies are not being able to achieve the projected cash flow as the economy continued to flounder with no pickup in demand.
Bankers feel it is better not to approve special restructuring packages that may be difficult to implement if the company fails to bring in the money.
Kumar said there were bilateral settlements between banks and borrowers, and the RBI move allowing banks to classify infrastructure loans as standard assets in the case of delayed commencement would have reduced the flow for CDR.
Banks were earlier forced to classify a loan as non-performing asset if the date of commencement of an infrastructure project got delayed by more than a year even if the repayments were on schedule.
Out of 10 references made to CDR during this quarter, the major cases included Rs 2,261.45 crore debt of Gupta Coal India, Rs 369.44 crore of Amrit Cement, Rs 6574.78 crore of IVRCL, Rs 809.23 crore Shiva Taxfabs and Rs 456.79 crore of Gayatri Hi-tech
Bank of India chairman and managing director Vijayalakshmi Iyer said companies were deleveraging by selling non-core assets and getting out of too many projects. “There are companies which are selling off commissioned power plants for cash flow.”
Bank of India executive director P Srinivas said it could be the end of the cycle for stressed assets, as a sizeable amount of debt had already been restructured. “There are only mid-value and low-value accounts, where there will be bilateral restructuring. The turnaround time in the CDR process is also getting longer, leading to delays in implementation. So banks are getting cautious.”
Other bankers, however, said it was too early to say if the NPA cycle had peaked. “Unless economic growth gathers momentum and demand picks up, cash flows of the companies will not be steady enough to make the repayments,” they pointed out.
Parthasarthy Mukherjee, head of corporate banking at Axis Bank, said, “The NPA cycle has not peaked, but it is not worsening either. In specific cases, projected cash flows are getting strained, which has made the banks cautious. We need to watch the data for a few more quarters before we can conclude if bad loan accretion has peaked.”