Bankers are unperturbed and chose to play down concerns that their loans to telecom operators would turn non-performing following the Supreme Court's verdict on new 2G licences.
The lenders claimed a majority of loans given for the new 2G licences were either backed with securities or by corporate guarantees. Hence, Wednesday’s ruling is unlikely to erode the quality of their loan portfolios, they said.
For instance, State Bank of India (SBI), the country's largest commercial bank, had given guarantees worth Rs 3,400 crore to a few service providers for getting 2G licences in 2008. Senior SBI officials said those guarantees were never invoked.
"Our only exposure to the new 2G licences is Rs 1,100 crore of loans to fund project expansion. These loans are backed by collateral," said Santosh Nayar, deputy managing director, SBI. The bank currently has Rs 20,000 crore of loans in the sector.
| FUTURE UNKNOWN |
| State Bank of India |
| The only exposure we have is about Rs 1,100 crore of loans to fund project expansion of telecom companies. These loans are backed by collateral, said Dy MD Santosh Nayar |
| YES Bank |
| We have a select exposure, 1.4%, to highly established and long vintage telecom players. This development is highly favourable to these companies as it will mitigate any market dissidence, said Rana Kapoor, founder, managing director |
| Axis Bank |
| Do not have any exposure to telcos for acquisition of the 2G licences or for the roll out of the 2G services under these licences |
| IDBI Bank |
| We have Rs 800 core loans with Idea Cellular, but no exposure in any other telecom companies whose licences have been revoked said B K Batra, deputy managing director |
Bankers said it was too early to raise an alarm on the quality of loans since the government may refund the money to operators. They said the parent or the group companies of the affected players were solvent enough to repay banks' debts.
Most banks dismissed concerns over possible deterioration in the quality of their loans. The stock market appears to confirm this view. The 12-share Bank Nifty on the National Stock Exchange gained 0.4 per cent, while the 14-share Bankex on the Bombay Stock Exchange rose 0.5 per cent in Wednesday's trade.
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According to broking house Avendus, funding to new licencees for the upfront licence fee and capital expenditure is estimated at Rs 5,900 crore, at 0.2 per cent of the total non-food loans. About 19 per cent of the amount has been lent by SBI.
Since a part of the exposure is likely to have already been restructured or become an NPL due to negative cash flows of most new licencees, the incremental impact on the slippage of banks may be low, Avendus said.
Punjab National Bank said its exposure to 2G relates only for roll out (pegged at Rs 508 crore).
Some of the top banks in the country said they do not have any loan exposure in the new 2G licences. "We have a select exposure, about 1.4 per cent, to highly established and long vintage telecom players. This development is highly favourable to these companies as it would mitigate any market dissidence," said Rana Kapoor, founder, managing director, and chief executive officer of YES Bank.
Axis Bank, the country's third-largest private sector lender, said the bank "does not have any exposure to telecom companies for acquisition of the revoked licences or for the roll out of 2G services under these licences". According to B K Batra, deputy managing director at IDBI Bank, the state-run lender has Rs 800 core loans with Idea Cellular.
A senior executive of Standard Chartered Bank said it was premature to assume the bank's asset quality would be affected because of the cancellation of the 2G licences.
L&T Infrastructure Finance, which has lent to telecom operators, said there wouldn't be any stress on the quality of their loans. "We have given loans only to old operators, hence, we won't be affected," said N Sivaraman, president of L&T Finance Holdings.
According to a few analysts,it could be a double whammy for banks as the quality of loans may come under stress. "We are still working on it (assessing the impact). By tomorrow morning, we will be able to assess what is the impact on the banking sector," said Financial Services secretary D K Mittal.