Mumbai: Banks and non-bank lenders will restructure up to 10 million in debt or 8 per cent of the outstanding loans under the one-off restructuring scheme announced by the Reserve Bank, local rating agency Icra said on Wednesday.
The RBI has operationalized guidelines based on the recommendations of the KV Kamath-led panel, which provides relief to 26 listed sectors affected by the pandemic and strain on banks leveraging leverage, liquidity and debt service, before a case is allowed.
“We feel that the overall restructured portfolio will amount to 5-8 percent of total loans,” the agency’s head of credit policy, Jitin Makkar, told reporters on Wednesday. As for the value, he said that the total quantum of the debt that can be restructured will be between Rs 6 lakh crore and Rs 10 lakh crore, specifying that banks have an asset book of Rs 100 lakh crore and another Rs 35 lakh crore is from the non-bank lenders.
He said the estimate of the amount of portfolio to be restructured is based on an assumption that total assets under moratorium fell to 20-25 per cent by the end of the six-month easing in August. Part of the assets benefiting from the moratorium are accounts with special mentions where 31 to 89 days had to be repaid, which cannot be restructured under the new guidelines, he added.
There may be a decline in the levels of non-performing assets (NPAs) as part of the highlighted progress is recognized as restructuring, the agency said, making it clear that the total amount of highlighted progress in the system is not will not decrease.
The agency expects that most of the restructuring proposals will meet the financial parameters set by the RBI and will meet the March 2022 deadline. The credit providers will immediately keep the measure of total outstanding liabilities to the adjusted tangible net worth, he said, adding that some sectors may face challenges to meet other measures, such as total debt to operating profit, debt service ratio and average debt service ratio.
For sectors such as textiles, construction, trade and ferrous metals, the total debt to the EBITDA threshold set by the committee is difficult to cross the BB rating barrier. The agency said it would use the same methodologies as before to give its opinion on a restructuring proposal, but wanted clarity on some aspects.
The RBI circular states that for exposures higher than R100 million an RP will be required, but it does not determine what the minimum RP rating should be for a plan to go through. The agency said the COVID-19 related disruptions still outweigh the credit quality of India Inc, and it has undertaken negative rating actions on 16 per cent of its rated portfolio.
There has been a recent trend of a successive improvement in industry statistics in most sectors as the restrictions on closure have been eased, he said.
Source: Telangana Today