Loan restructuring by banks to touch Rs3,25,000 crore by end of current fiscal

Banks' portfolio of restructured loans will touch Rs3,25,000 crore or around 5.7 per cent of their advances by end of the fiscal, rating agency Crisil said today.

Crisil, which had earlier estimated the loan restructuring to touch Rs2,00,000 crore by March 2013, said loans to the state power utilities (SPUs) and the construction and infrastructure sectors has added to the figure.

SPUs alone will contribute a half of the restructuring at Rs1,50,000 crore, as they are increasingly finding it difficult to raise unsecured short-term loans from banks in the current situation to refinance debt obligations, Crisil's senior director Pawan Agrawal said.

He said infrastructure developers and the construction sectors are finding it difficult to raise adequate equity in a timely manner, he said.

"Around Rs50,000 crore of these restructured loans may slip into NPAs," he said, adding that chances of loans to SPUs slipping into non-performing assets (NPAs) are limited as they will be bailed out by state and central governments.

"Most likely SPU-loan restructuring will happen through a centralised scheme coordinated by the Government of India," the agency noted. Restructuring has been widely seen as an escape route used by banks to hide delinquencies. Some analysts also say that with an overall slowdown in the economic growth, the restructuring portfolios can wreck the financial system.

RBI has also been very critical of loan restructuring. Deputy governor K C Chakrabarty had recently said that the process carried out by banks, especially the state-run ones, is biased towards more privileged customers and that "lack of ethics" has resulted in an unprecedented rise in corporate debt restructuring cases.

Crisil expects GDP growth to fall sharply to 5.5 per cent for the year. This slip could lead to gross NPAs of banks going up to 3.5 per cent by March 2013 from the 3 per cent in June 2012, it added.