New Delhi: Informal talks are taking place to deal with the fall-out from two rulings by India’s Supreme Court that threaten the repayment of loans totalling nearly Rs500 billion ($6.73 billion) to some of India’s largest banks, bankers close to the matter say.
Any failure to recoup the money adds to stress in the banking sector, which is already dealing with an increased level of bad loans and reduced profits because of the impact of the pandemic.
Last week, India’s Supreme Court effectively blocked Future Group’s $3.4 billion sale of retail assets to Reliance Industries, jeopardising nearly $2.69 billion the retail conglomerate owes to Indian banks.
That ruling was delivered days after the Supreme Court rejected a petition to allow telecom companies to approach the Department of Telecommunications to renegotiate outstanding dues in a long-runinng dispute with Indian telecom players.
The immediate apprehension is that the restructuring deal will fall through for banks by December
That raises concerns, bankers say, over whether Vodafone Idea will repay some Rs300 billion ($4.04 billion) it owes to Indian banks and billions of dollars more in long-term dues to the government.
Two bankers, speaking on condition of anonymity said negotiations were taking place to try to limit potentially severe consequences.
Loans to Future worth nearly Rs200 billion were restructured earlier this year, giving it more time to come up with repayments due over the next two years, but that was on the premise that Reliance would bail it out, the bankers said.
Future’s leading financial creditors include India’s largest lender State Bank of India, along with smaller rivals Bank of Baroda and Bank of India.
Already, at the end of March, Indian banks had total non-performing assets of Rs8.34 trillion ($112.48 billion), the government has said. It has yet to provide more updated figures.