The Reserve Bank of India (RBI) has estimated the total exposure of Indian banks and foreign lenders operating in India to Satyam Computers Services and its related companies at around Rs 8,000 crore.
Sources close to the development said that this figure includes the total direct and indirect exposures to Indian and international operations of the companies so far.
After the accounting fraud in Satyam came to light at the end of December 2008, the RBI had sought data from banks, which have direct or indirect loan and equity exposure to Satyam and its related companies or subsidiaries.
Based on the initial findings of the Hyderabad office of the Registrar of Companies (RoC), the government had ordered a probe by the Serious Fraud Investigation Office (SFIO) into the eight companies related to Satyam Computers, which have forayed into other areas such as real estate.
After gathering of data, the banks were advised to write off the short-term loans to the company to maintain the margin amount with broking houses and custodians, to keep the shares afloat in the market, as there has been a sharp fall in the share prices. This situation is more likely now since the market value of the shares have eroded following the sequential events.
However, those who have institutional holdings in direct equity and long-term loans may be asked to follow the usual debt recovery route. Banks may also ask the company to release funds from its vast expanse of real estate holdings. Else, banks may have to book losses on such expsoures on account of fraud if dues cannot be recovered, they said.
Usually, since the company has admitted financial irregularities, the dues to various lenders and creditors may become non-performing assets (when dues remain unpaid). As per the RBI guidelines, in such cases, the bank needs to first classify the asset as non-performing and make adequate provisioning against such dues. Only then can recovery proceedings be initiated against the company.
However, as per the data available in the public domain, no bank has an exposure of more than 1 per cent to the company, sources said .
Sources said the loan exposure in the form of margin money may have a direct impact as these have to be marked to market immediately.
The entire exercise will be a drag on the balance sheet of the banks, which is due for closing in two months. This also comes at a time when the accounts are already falling into sub-standard or the non-performing category following the economic slowdown, said a source.
“Mark to market” is an exercise to value the investments as per the present market value of the scrip. The scrip has fallen in value and is in the process of being removed from the market index.
