Banks have Rs 16k-cr exposure to telecom players in 2G case

This is mostly secured and will not hurt banks? profitability, assures govt

The Union finance ministry on Monday said banks have an exposure of about Rs 15,800 crore to those telecom operators whose 2G spectrum licences were cancelled last week by Supreme Court order. However, most of these loans were secured and this would not hurt the banks’ profitability.

“The cancellation of licences will not have any material impact on banks. The exposure is, by and large, secured in the form of various tangible and other securities. Moreover, the cancelled licences represent only certain (telecom) circles and many of those are remote areas. So, it is not a major cause of worry,” a ministry official told Business Standard.

The SC had cancelled all 122 licences awarded to nine telecom companies after January 2008. The total exposure of public sector banks in all these cases is Rs 14,400 crore, with State Bank of India and Canara Bank the major lenders. Punjab National Bank and IDBI Bank also have some exposure to these telecom companies.

Among the major private lenders, ICICI Bank and HDFC Bank have an exposure of Rs 1,300 crore and Rs 90 crore, respectively. The exposure of private banks is broadly covered by recourse in the form of fixed deposits, bank guarantees or corporate guarantees.

Of the total exposure of state-run lenders, about Rs 3,300 crore is considered unsecured. However, since a substantial part of this is to large corporate houses such as Tata, Videocon and Aditya Birla, which have a “fair amount of credibility”, the government is confident that recovery would not be difficult.

After the licences were cancelled, on the ground that these were issued in an arbitrary and unconstitutional manner, ratings agency Fitch issued a report that this would hit banks’ profitability by 10 per cent.

The ministry official said all loan accounts were regular as on February 1, barring dues of about Rs 12 crore. He said only a month was left in the current financial year and it was not possible that the loans would turn bad in that period, since it takes 90 days to classify a loan as a non-performing asset.

“If at all there is an impact, that will be seen in the first quarter of next financial year,” he said, adding the government was closely monitoring the financial impact of the order on banking sector in general and public sector banks in particular.