COURTESY HT NOV 26

Small, medium biz send SOS to banks for debt restructuring
Banks are seeing more requests from biz with outstanding loans of less than ₹500 crore

Shayan Ghosh

shayan.g@livemint.com

mumbai : Thousands of small- and medium-sized companies in India have missed loan payments and are staring at a prolonged period of distress owing to the pandemic while the larger ones have held their ground and, in some cases, thrived, loan recast data from top lenders showed.

Micro, small and medium enterprises (MSMEs) make up the overwhelming majority of companies that are seeking easier loan repayment terms from banks under the Reserve Bank of India’s special restructuring window for those affected by the coronavirus pandemic, according to the data.

While the trend is along expected lines, given the severe distress faced by businesses, senior bankers said that emerging data suggests that a disproportionately large number of MSMEs have been hit by the crisis compared to large corporates, which have managed to avert an immediate cash flow crisis—as can be inferred from the negligible number of loan recast proposals from them.

Loan recast proposals in the retail segment, too, have been relatively low so far.

Bankers said they expect to complete a full review of the loan recast requests by end-December and that the current trend may change somewhat by then.

State Bank of India (SBI), the country’s largest lender, has received recast requests from 35,000 MSME borrowers. That apart, 2,600 borrowers have applied for a restructuring of their personal loans and another 4,291 home loan customers have asked for recast. However, as banks have till December 31 to agree on resolution plans, SBI expects an additional restructuring of ₹13,000 crore worth of loans.

Rival public sector banks are reporting similar trends. Most of the requests received are from small businesses, two senior bankers said on condition of anonymity.

Banks are seeing more requests from businesses with outstanding loans of less than ₹500 crore, they said, adding that many of these firms have been severely affected by disruptions in supply chains during the lockdown.

“While large corporates are not looking to seek debt recast, companies, where our aggregate exposures are below ₹500 crore, are seeking relaxations. These include the extension of repayment periods and even moratorium on payments, which are currently being finalized,” said one of the two bankers.

“Banks are encouraging smaller companies, mostly in the range of ₹100-250 crore in loan exposure but below ₹500 crore, to use this window provided by the central bank,” said the first banker.

The second banker said small companies will need to deleverage, but debt issues in large corporates that emerged between 2014 and 2018 have largely been addressed.