The losses of banks have been mounting to the tune of Rs. 15,000 crores per quarter, due to the stressed companies which has prompted the banks to ring the alarm bell. The banks have asked the heavy firms to speed up the process of sale of assets before March 31, this year.
Banks have been forced to fix this deadline due to lack of transparency from the clients’ side, inspite of various announcements by the companies in the past. It is not clear as to when the companies will come to normalcy even during the next financial year.
The PSU bank officials add that the time line set was extended further, due to the demonetization issue, which hit the previous quarter. Now that the economy is on track, the banks have been concentrating on the recovery of money from large borrowers before the close of the current financial year. Big companies like Essar Group, Jindal Steel and Power, Monnet Ispat Bhushan Steel and Avantha group are those who have been advised to expedite the process. RBI has been pressing hard for an early resolution which has resulted in putting pressure on big ticket companies’ management to ensure early sale of assets and liquidate the dues. PNB has entered in to a special arrangement with the steel companies, to divert 10-15 per cent of their revenues for partly repaying the dues. The imposition of duties on steel by the Government has enabled these companies to increase their product prices, resulting in an increased profit. Thus the bank could recover around Rs. 1000 crores in 3 or 4 cases .
Similar assurances have again come from other companies, for reduction of the Stressed Assets figure. However despite the sale of assets, the financial position of few stressed companies had come down with their combined losses which ran to around Rs. 15,000 crores for the current quarter, which had shown a marginal profit last year.
Another worry for banks since the second half of 2016, is that a significant proportion of increase in NPAs ( four fifths of the slippage is attributed to the second quarter) has come from big companies, which is likely to continue.
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