Failure to collect the money adds to stress in the banking industry, which is already facing an increased level of bad debts and declining profits due to the impact of the pandemic

Informal talks take place to deal with fallout from two Indian Supreme Court rulings that threaten repayment of loans totaling nearly 500 billion rupees ($ 6.73 billion) to some of India’s biggest banks, bankers say close to the file.

Failure to collect the money adds to stress in the banking industry, which is already facing an increased level of bad debts and declining profits due to the impact of the pandemic.

Last week, the Indian Supreme Court effectively blocked the sale of Future Group’s retail assets for $ 3.4 billion to Reliance Industries, putting at risk nearly $ 2.69 billion the retail conglomerate owes to Indian banks.

The ruling came days after the Supreme Court dismissed a petition allowing telecommunications companies to go to the Department of Telecommunications to renegotiate unpaid dues amid a long-standing dispute with India’s telecommunications players. .

This raises concerns, bankers say, whether Vodafone Idea will repay some 300 billion rupees ($ 4.04 billion) it owes Indian banks and billions more in long-term government dues. .

FUTURE OF THE FUTURE?

Two bankers, speaking on condition of anonymity, said negotiations were underway to try to limit the potentially serious consequences.

Future loans worth nearly Rs.200 billion were restructured earlier this year, giving it more time to make repayments owed over the next two years, but that was in on the assumption that Reliance would bail them out, the bankers said.

The prospective group did not immediately respond to a request for comment.

If Future were to be taken to bankruptcy court, bankers fear they will have to cut loans by more than 75%.

“The immediate apprehension is that the restructuring deal will fail for the banks by December,” said a banker at a public sector bank that loaned money to Future.

Future’s main financial creditors include India’s largest lender, State Bank of India, as well as its smaller rivals Bank of Baroda and Bank of India.

Bank of India, the lead bank of the Future-lending consortium, did not immediately respond to an email request for comment.

VODAFONE IDEA

Banks have also started discussing Vodafone’s debt to lenders of nearly Rs.300 billion. Vodafone’s main lenders are Yes Bank, IDFC First Bank and IndusInd Bank, as well as other private and public lenders.

Vodafone, Yes Bank, IDFC First Bank and IndusInd did not immediately respond to a request for comment.

“Even if banks have the option to restructure loans in the event of a business failure, it will only make sense if there is clear visibility of cash flow, which is not currently the case. “said a senior banker at a public sector bank on condition of anonymity. .

Already, at the end of March, Indian banks had total non-performing assets of 8.34 trillion rupees ($ 112.48 billion), the government said. He has yet to provide more updated figures.

($ 1 = 74.2400 Indian rupees)


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