Banks masking Rs 1.5 lakh crore through SDR: Religare

Religare Institutional Research has said in a report that by March 2017, banks in India might end up refinancing 30-40 accounts under strategic debt restructuring (SDR) exercise, worth as much as Rs 1.5 lakh crore, or 2.2 per cent of total credit.

"Most of these are coming out of a standard restructuring moratorium and would have slipped into NPA (non-performing asset), but for banks' recourse to SDR," Religare said in its report.

According to Religare, banks have invoked SDR in 15 companies, worth Rs 81,300 crore. Under the SDR scheme, banks convert a part of the loan into equity, holding at least 51 per cent through the consortium.
 

The conversion is not treated as restructured assets and retains the existing classification. Banks are required to find a new buyer for the accounts within 18 months for these accounts.

"In effect, SDR does not solve the problem of ballooning bad assets in India's banking system, but merely exacerbates it by postponing and obscuring true NPA recognition," the report said.