Feb 02 2012 , Mumbai
Rs 10,000 cr deployed in licence acquisition
RBI has started a process of assessing banks' exposure to telecom companies. It has asked all banks to submit their individual exposure to the sector, in particular, to companies whose licences were cancelled.
A senior RBI official told Financial Chronicle that banks funded about Rs 10,000 crore to various companies to acquire licences. Banks have also funded their roll-out of telecom services as well as setting up of infrastructure.
“Total banks’ exposure would be around Rs 10,000 crore. We are still assessing the situation to identify the full impact this verdict on banks. If the licences are cancelled, the money will flow back to the banks’ books. The guarantees were given for getting licences and if these do not exist, government will have to give back the money that these companies paid,” said the central banker.
Most of the funding was done by public sector banks while participation of private sector lenders was smaller. The sanctioned limits were much higher but it was not drawn down by the companies. State Bank of India (SBI) has the largest exposure among the public sector banks. The bank has a direct exposure of Rs 1,100 crore and a non-fund exposure of Rs 3,000 crore (guarantees offered to the government by the companies to acquire licences). Santosh Nayar, deputy managing director and group head-corporate accounts, said both their direct and non-direct exposure is expected to flow back into bank's books as the government pays back the companies both the licence fee and guarantees. "To that extent, there is no impact on the bank's books."
The second-largest exposure is by IDBI Bank that has given Idea about Rs 800 crore and S Tel Rs 120 crore.
Punjab National Bank (PNB), the only bank which put up its funding details on its website on Thursday, said it has a total exposure Rs 508 crore, lend towards direct roll-out of 2G services. It has not lent for licence and non-fund exposure. Canara Bank has about Rs 250 crore exposure to Tata Teleservices while Corporation Bank has a Rs 146 crore exposure to Videocon Industries.
In response to a query from Financial Chronicle, a spokesperson for ICICI Bank said, "ICICI Bank does not have any exposure at risk on account of this."
Ajai Kumar, chairman and managing director of Corporation Bank, told this newspaper that the banks lend in good faith for a good business proposition. "Our exposure is only to Videocon Industries. We also got corporate guarantees from the company. We will have to assess implications of the ruling on our exposure.”
Bankers say most of the lending was collateral lending wherein a Trust and Retention Account was created by all lenders in the consortium. And the lenders had the first charge on the revenues that would be accrued to these companies and first share in the assets. This was the first time the 2G licences were allotted to companies and even if companies lacked experience it was believed that they would be able to effectively roll out the plan proposed, and payments would be made.
"We are looking at how things will pan out in the next few months. Future of those companies is not yet known. But we are hopeful that we will be able to recover outstanding loan,” said a senior PNB official.
Other banks such as Bank of India have no exposure to the companies for acquiring the licences. But a senior BoI official said, “We have given a loan of Rs 676 crore loans to Idea Cellular and Tata Teleservices for developing the telecom infrastructure.” The total telecom exposure of all the banks is Rs 90,970 crore as on January 31, 2012.
(With inputs from Shruti Verma Khare in New Delhi)
A senior RBI official told Financial Chronicle that banks funded about Rs 10,000 crore to various companies to acquire licences. Banks have also funded their roll-out of telecom services as well as setting up of infrastructure.
“Total banks’ exposure would be around Rs 10,000 crore. We are still assessing the situation to identify the full impact this verdict on banks. If the licences are cancelled, the money will flow back to the banks’ books. The guarantees were given for getting licences and if these do not exist, government will have to give back the money that these companies paid,” said the central banker.
Most of the funding was done by public sector banks while participation of private sector lenders was smaller. The sanctioned limits were much higher but it was not drawn down by the companies. State Bank of India (SBI) has the largest exposure among the public sector banks. The bank has a direct exposure of Rs 1,100 crore and a non-fund exposure of Rs 3,000 crore (guarantees offered to the government by the companies to acquire licences). Santosh Nayar, deputy managing director and group head-corporate accounts, said both their direct and non-direct exposure is expected to flow back into bank's books as the government pays back the companies both the licence fee and guarantees. "To that extent, there is no impact on the bank's books."
The second-largest exposure is by IDBI Bank that has given Idea about Rs 800 crore and S Tel Rs 120 crore.
Punjab National Bank (PNB), the only bank which put up its funding details on its website on Thursday, said it has a total exposure Rs 508 crore, lend towards direct roll-out of 2G services. It has not lent for licence and non-fund exposure. Canara Bank has about Rs 250 crore exposure to Tata Teleservices while Corporation Bank has a Rs 146 crore exposure to Videocon Industries.
In response to a query from Financial Chronicle, a spokesperson for ICICI Bank said, "ICICI Bank does not have any exposure at risk on account of this."
Ajai Kumar, chairman and managing director of Corporation Bank, told this newspaper that the banks lend in good faith for a good business proposition. "Our exposure is only to Videocon Industries. We also got corporate guarantees from the company. We will have to assess implications of the ruling on our exposure.”
Bankers say most of the lending was collateral lending wherein a Trust and Retention Account was created by all lenders in the consortium. And the lenders had the first charge on the revenues that would be accrued to these companies and first share in the assets. This was the first time the 2G licences were allotted to companies and even if companies lacked experience it was believed that they would be able to effectively roll out the plan proposed, and payments would be made.
"We are looking at how things will pan out in the next few months. Future of those companies is not yet known. But we are hopeful that we will be able to recover outstanding loan,” said a senior PNB official.
Other banks such as Bank of India have no exposure to the companies for acquiring the licences. But a senior BoI official said, “We have given a loan of Rs 676 crore loans to Idea Cellular and Tata Teleservices for developing the telecom infrastructure.” The total telecom exposure of all the banks is Rs 90,970 crore as on January 31, 2012.
(With inputs from Shruti Verma Khare in New Delhi)
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