Banks with 2G loans to claim losses from government

Source :ET:3 FEB, 2012, 05.26AM IST, ET BUREAU


MUMBAI: Top state-run banks led by State Bank of India and Punjab National Bank, with more than 6,000 crore loan exposure to telecom companies, will claim from the government the fees these companies paid as the licences were pledged with them. 


This will protect them any losses since depending on companies to repay debt may be fruitless as their operations are under threat beyond the four-month deadline set by the Supreme Court, said top lenders who did not want to be identified. 


Leading private lenders such as ICICI Bank and HDFC Bank said their loans will not be affected by the ruling. It is not clear whether the government would honour public sector banks' requests, or will stand legal scrutiny. 


"While we expect them to explore all possibilities, and the situation remains fluid, on the face of it some of these smaller operators will be faced with the choice to either close operations or re-bid for licences,'' Fitch Ratings said in a press release. "It is unclear whether some players will have the stomach or resources to invest more to defend businesses which are still in start-up mode.'' 


Theoretically, licence is the main security against which banks have lent them money and if the licence is revoked, banks have little security to claim their loans. If the account becomes a loss asset, banks will have no tangible security to recover their funds. 


SBI, which controls one-fifth of the market share, has given close to 1,100 crore in loans and another 3,400 crore in the form guarantees to companies which had received 2G licences while PNB has given loan of 508 crore. Among other banks, Corporation Bank has lent 146 crore to companies with 2G while IDBI has an exposure of 800 crore to telecom companies with 2G and 3G. Indian Bank officials said that their exposure is 39 crore to companies with 2G licence. 


Some believe that companies such as Norway's Telenor that have huge stake and reputation will work to salvage the situation. 


"Most of the telcos are large players therefore it is unlikely that they will create NPAs for banks since they have committed huge capital,'' said Hemindra Hazari, head of research institutional equities at Nirmal Bang. 
"Since large foreign players are involved, they would not like to jeopardise their credit rating."