The prolonged economic slowdown is sending more companies to debt restructuring.
The amount of loans referred to the corporate debt restructuring (CDR) cell has grown over four-fold to Rs 19,500 crore in April-June 2012 from Rs 4,680 crore in the same period a year ago.
Steel and textile units continued to lead the pack.
Out of the 37 cases referred to the CDR cell in the first quarter, seven each were from the iron and steel and textiles sectors, according to a senior public sector bank executive.
IDBI Bank Executive Director B Ravindranath, who is chairman of the CDR cell, said the flow of big-ticket cases slowed down, while there was an influx of more small and medium-sized companies, facing strain due to receivables.
A report by broking house Prabhudas Lilladher said detailed corporate health check for about 3,500 listed companies indicated that the credit cycle was getting deeper. The breadth of mid- and small-cap companies facing stress was increasing at a brisk pace along with an elongated downcycle, leading to higher “ultimate delinquencies”.
The saving grace, however, is that the assets of large-cap companies have held up better. More importantly, stress sectors have already seen large-scale recognition, either as non-performing assets or restructured asset.
The implications of the deteriorating corporate health are far more for public sector banks, which have over 70 per cent share in banking business.
In the year ending March 2012, the ratio of gross non-performing assets rose to 2.9 per cent of total loans, up from 2.4 per cent a year ago.
Bankers said they expect the pace of reference to corporate debt restructuring forum to stay high in 2012-13.
Though banks have begun to cut lending rates after the regulator reduced its key policy rate, it will take a while to see reduction in interest costs for companies.
The amount of loans referred to the CDR cell saw over three-fold growth at about Rs 80,000 crore in 2011-12 from about Rs 25,000 crore in 2010-11.
