Loan restructuring to hit Rs 3.25 lakh crore: Crisil

Higher funding requirement of companies with large debt will push up Indian banks’ loan restructuring during 2011-13 to Rs 3.25 lakh crore, which will form 5.7 percent of their total advances, rating agency Crisil has estimated.

Of this, Rs 50,000 crore of loans are likely to turn non-performing assets, further aggravating the already stressed asset quality of banks by 50-75 bps beyond March 2013, it said.

Most of the public sector banks have witnessed an increase in their NPAs during April-June.

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However, the restructuring will help banks limit their bad loans in the near term, said Crisil, which sees banks’ gross NPAs at 3.5 percent by March 2013, up from 3 percent a year ago.

“The increase will be driven largely by delinquencies in the micro, small and medium enterprises, and agriculture and allied sectors,” Crisil said in a press release.

State Bank of India, the country’s largest lender, had earlier attributed in the increase in its NPAs to the SME sector. Chairman Pratip Choudhury had said weak rains have pushed up the slippages in the agriculture sector.

Already in 2011-12 and in the first quarter of 2012-13, loan restructuring has hit Rs.1.6 lakh crore, close to Crisil’s initial estimate of Rs 2 lakh crore for the two-year period.

The maximum restructuring will happen in loans for state power utilities (SPUs), and the construction and infrastructure sectors, it said.

“In recent months, availability of unsecured short-term loans from Indian banks has diminished. This is exacerbating refinancing and liquidity pressure, especially for the SPUs,” said Pawan Agrawal, senior director, CRISIL Ratings, in the press release.

The restructuring by SPUs is seen increasing to nearly Rs 1.5 lakh crore, he said. So far, SPU loans of Rs 60,000 crore have been restructured.

Companies in infrastructure and construction are financially strained as they have not been able to raise funds through equity, which is pushing them to restructure their loans, Crisil has said.