Wednesday, March 26, 2014

PSU banks to act tough on loan recovery, to force management changes

SBI chairperson A Bhattacharya
IN A bid to check the pile up of bad loans, the PSU lenders have decided to act tough against the defaulters. The public sector banks have decided this following strong directive for recovery of NPAs from RBI governor Raghuram Rajan and Finance Ministry officials to adopt an aggressive approach. It is expected to help banks recover over...
Rs 30,000 crore in the near future.
In one of their most proactive steps till date, banks like SBI have started brokering deals between defaulting companies and investors like PE funds. According to media reports, SBI chairman Arundhati Bhattacharya has been personally involved in some of these meetings. The recent deal in the works between Hotel Leela Ventures and Global PE giant KKR is said to be a result of these efforts.
Hotel Leela Ventures is undergoing a corporate debt recast, and bankers have given them a deadline of March 31 to raise Rs 2000 crore, failing which the account may be pulled out of the CDR Cell.
The report quoting top banking sources said similar efforts are under way in the case of the Abhijeet Group's Rs 4000-cr venture called Corporate Power, Kolkata-based steel-maker Maithan Ispat (debt of Rs 500 cr) and Chhatisgarh-based Vandanaa Vidyut (debt of Rs 1000 cr).
Earlier, SBI chairman Arundhati Bhattacharya told a TV channel that the message from her bank to defaulters is loud and clear. "Definitely, wherever we can and where we feel that the company will benefit by either a change in management or overseer, to continuously check what the management is doing - Wherever these things are required we will do them. The intention is that if we have put in money, we have to ensure that the money is safeguarded and we will do whatever it takes to ensure that," she said.
She also said that to avoid a further worsening in its asset quality, SBI will conduct weekly reviews, and install new technology, to identify loan accounts showing signs of stress.
Ratings agency Fitch earlier said stressed assets at Indian banks, as well as bad and restructured debt, to total 14 percent of loans by March 2015, up from nine percent in March 2013.
In a clear change in approach, banks like SBI are also planning to force out managements in errant companies like Sai Infosystems, and Progressive Constructions - a company linked to Congress MP Kavuri Siva Rao. In fact, SBI has already appointed Alvarez & Marsal, a global firm that specializes in turning around sick companies to change the management at Sai Infosystems. It is also pursuing stringent recovery efforts in the case of Progressive Constructions.

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