Fearing heavy haircuts in their exposures to various IL&FS firms, three state-run banks–SBI, PNB and BoI– and private sector lenders on Wednesday met department of economic affairs secretary S C Garg and sought the ministry’s intervention to minimise their losses on repayment. State Bank of India’s MD Arijit Basu, Punjab National Bank’s MD & CEO Sunil Mehta and senior officials from Bank of India , HDFC Bank and Yes Bank raised their concerns with Garg at the finance ministry and discussed the prospects of loans recovery. They expressed the hope that the new, government-appointed board would take care of their concerns.
The beleaguered company’s debt pile had grown to more than Rs 91,000 crore ($12.33 billion) and banks have about Rs 58,000 crore exposure in that.
A group of banks led by BoI and SBI have lent IL&FS Rs 34,480 crore. A Kotak Institutional Equities report says BoI has the highest exposure to the debt-trapped firm, with loans of Rs 2,388 crore, followed by SBI at Rs 2,140 crore and PNB at Rs 1,859 crore. Yes Bank has the largest exposure among private sector banks at Rs 1,841 crore. Individual banks have not disclosed their exposure to the ailing company.
These banks do however believe that Centre’s decision to overhaul the company’s board has improved their chances of recuperating the money, but with some haircut. Their fear is that a haircut of more than 35-40 per cent will make recovery almost insignificant for them. Having made huge provisioning for NPAs, the lenders are pinning all their hopes on monetisation of the IL&FS assets and are getting ready for some amount of loan restructuring and delay in payments. They will also have to consider mark-to-market losses on these loans, a finance ministry official said.
Although no one commented after the meeting, the government is reported to have allayed the bankers’ fears, terming it as a short-term liquidity issue that can be resolved, once interested parties come up for taking over IL&FS’ roads, power and energy-linked projects.