Banks restructure corporate loans worth Rs 2.04 lakh crore in FY 17

The amount of corporate loans restructured by lenders has seen a decline in the last three financial years, according to the data tabled by Finance Minister Arun Jaitley in the Rajya Sabha Tuesday. Banks restructured loans, that were sanctioned to companies, of worth Rs 3,70,279 crore in FY2014-15 and Rs 2,99,111 crore in 2015-16. The amount of restructured corporate loans came down to Rs 2,04,884 crore in the last financial year, as per the data.

The finance minister was responding to a question seeking names of companies whose loans have been restructured and at what terms. "Any restructuring is to be carried out in accordance with detailed guidelines issued by RBI on restructuring like Joint Lenders' Forum (JLF), Strategic Debt Restructuring (SDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A)," Jaitley said. The finance minister further said that "the names and details of borrowers are covered under section 45E of RBI Act, 1934 and banking laws. "... which (the Act and banking laws) oblige financial institutions to maintain secrecy about the affairs of their constituents." On provision for restructuring of farm loans in case of natural calamities, he said banks can facilitate restructuring, including conversion of short-term debt to term loan or re-schedulement or repayment time-frame to such borrowers with benefit of retention of asset classification." For agricultural accounts that became impaired on account of reasons other than natural calamities, restructuring is allowed in terms of RBI guidelines on Income Recognition and Asset Classification (IRAC)," Jaitley said.

Many corporate houses are reeling under debt burden in recent years due to tepid demand growth. Recently, RBI has notified 12 corporate accounts under the new bankruptcy norm for earlier recovery of loan amount by the banks. Resolution of non-performing assets (NPA) issue is critical to India’s future growth as it is holding back private investment in recent time. Therefore, decline in restructured accounts is an indication that demand growth is picking up, which will in turn boost corporate profitability. Analysts are of the opinion that the new bankruptcy regulation will be helpful in resolving the bad asset issues of Indian banking system.