RBI curbs on UBI stall Rs 20,000 cr debt recast
Jan 15 2014 , Mumbai
The five companies with a total debt of Rs 20,450 crore have already got their corporate debt restructuring (CDR) packages approved by a consortium of 29 public and private sector banks of which United Bank of India was a part.
Banks involved in the restructuring are planning to move RBI to reconsider the decision so that they can go ahead with the approved CDR packages and disburse the additional shares as per the mandates approved by a super-majority of the consortium.
RBI conducted a forensic audit on United Bank of India in November after its net loss surged to Rs 489.5 crore and non-performing loans rose to 7.5 per cent from 5.6 per cent. Later, the central bank asked the bank to desist from any debt restructuring until further instruction.
According to banking sources, the Hyderabad-based Lanco Infratech had got approval to restructure Rs 7,000 crore of its debt, Soma Enterprises about Rs 4,000 crore, the Electrosteel unit of Electrosteel Castings Rs 6,500 crore, Arch Pharma Rs 2,300 crore and Abhijeet Ferrotech Rs 650 crore.
United Bank’s inability to go ahead with the restructuring will adversely impact other lenders in the consortium. Officials at the banks involved said there would be considerable stress in the system if the corporate debt restructuring packages could not be implemented even in those cases where the mandates have already been given.
The total exposure of United Bank of India to the five companies is just Rs 1,300 crore, but the consortium has already extended fund-based and non-fund-based exposures to the companies.
In the big cases being lined up for restructuring, the lenders have also provide additional funding under the final CDR package.
Lanco Infratech, for example, has got about Rs 80 crore priority loans approved by the banks, including United Bank of India.
Soma Enterprises has got Rs 10 crore additional funding and Electrosteel about Rs 50 crore.