Corporates to pay fee on unused loans

Companies will now have to pay a charge for loans sanctioned to them but not utilised. From this year, banks are required to set aside capital for unused portion of loans under the new capital adequacy guidelines. So far, only loans availed attracted capital adequacy norms.

As a result, banks have started asking companies to reassess if they require the loan limits sanctioned to them. For companies that want to continue to avail of their committed credit limits, the banks will levy a charge on the undrawn portion of the loan.

According to an official of a large bank, "One of two things will happen. We will take a relook at whether or not clients require those lines. If they do, we will charge a fee on the unused credit limit."

Companies avail of the sanctioned loan in phases depending on their need. Cash-rich companies often do not draw the entire loan. However, the unused amounts are included in calculating a bank's total exposure to a company.

In the case of term loans, which are spread over 15-20 years and come up for constant appraisal, large portions are often not availed of. Similarly, for cash credit facilities, which are normally subject to renewal once a year, companies draw only a part of the committed amount. "This would involve substantially higher capital requirements for banks," said another bank official.

If, out of a Rs 500 crore loan, a corporate does not draw Rs 100 crore, the bank will have to set aside a capital for 20 per cent of the undrawn amount or Rs 20 crore (If the loan is maturing after a year, then 50 per cent of the undrawn amount would have to be considered).

Applying a risk weight of 100 per cent, as applicable to a BBB-rated corporate, the bank will have to provide an additional Rs 1.8 crore of capital.

According to a banking analyst, the cost of raising Rs 1.8 crore by way of debt at the current coupon rate of 10 per cent, would be Rs 18 lakh. This is around 20 basis points of the undrawn loan amount of Rs 100 crore.