Mumbai : Reflecting the continued stress in the corporate sector, banks referred a record Rs 1.09 trillion worth of stressed assets to the corporate debt restructuring (CDR) cell between April and December, exceeding the level of Rs 91,400 crore for all of the previous financial year.
“There has been an increase in the number of high-value accounts being referred by the banks,” the CDR cell official told PTI on condition of anonymity.
Banks referred as many as 83 cases in the first nine months of this financial year, compared with 129 cases during 2012-13, the official said.
In December alone, 14 cases worth over Rs 18,000 crore were referred to the cell, the official said, adding that the bulk of them came in the last 10 days of the month, indicating a quarter-end rush to reclassify bad loans.
The CDR cell approved 44 cases involving Rs 66,000 crore in December, the officer said. Big-ticket loans that were restructured during the fiscal include Rs 13,500 crore from Gammon India, Rs 7,320 crore of Lanco and Electrocast Steel’s Rs 6,460 crore. The CDR cell is a facility for banks to jointly resolve stressed assets. Loans are restructured by typically extending the repayment period to accommodate temporary cash flow issues faced by borrowers.
The continued rise in referrals to the debt recast cell indicates there has been no turnaround so far in the country’s overall corporate activity. In November, Reserve Bank of India Executive Director B. Mahapatra had raised concern on rising cases of loan restructuring, and said things were “quite out of control”.
In recent years, amid the economic gloom, delays in project clearances and high interest rates, there has been an increase in the prevalence of stress, which has hurt the asset quality of banks.
According to the Reserve Bank of India, the amount of recast loans touched an all-time high of Rs 4 trillion, or 10.2% of overall advances, as of the September quarter. In recent past, the central bank has repeatedly said that if loan restructuring cases surge, banks should be ready for higher provisioning and borrowers must bring in more equity as well personal guarantees.