As concerns over deteriorating asset quality loom, lenders have begun approaching debt-recovery courts to recover a part of their estimated credit exposure of INR 173 billion to Mumbai-based Topworth. With this, India adds another to its bad loans count.
As per a report on ET, lenders led by the State Bank of India (SBI) and Punjab National Bank (PNB) are filing cases in the Mumbai debt recovery tribunal (DRT) –– either individually or as a consortium –– against Topworth Urja & Metals, Phoenix Impex and Poscho Steels for cumulative defaults of about INR 32 billion. Bank of Baroda has already filed a case against Topworth Pipes & Tubes in Mumbai DRT to recover INR 3.56 billion. Similarly, PNB has INR 9 billion of exposure to Topworth and is keen on taking legal action within next two weeks.
Lenders have initiated recovery after recognizing sticky loans of INR 6.97 trillion, or 9.3% of total advances until December 31, according to statistics compiled by CARE Ratings. Even as the central bank announced multiple restructuring packages so the company could revive, bad loans have risen 135% from INR 2.62 trillion in the past two years.
Meanwhile, Topworth has disputed the quantum of loans. As per the group, their exposure across the four flagship group companies ie Topworth Steel & Power, Crest Steel & Power, Topworth Urja & Metals and Topworth Pipes & Tubes is INR 52 billion. Other companies are holding companies which have assets under them and these companies have given corporate guarantees against loans. The banks create a charge against the collateral given. Therefore, calculating total exposure including the charge created should ideally not be done.
Arijit Chakraborty, a practising chartered accountant, said creating a charge against collateral means that these are secured loans and are backed by tangible security. For a bank, however, secured loans also form a part of the total exposure to a business entity.
Debt recovery initiative by banks against Topworth is a recent instance of lenders trying to settle bad loans. It seems, with the growing number of such loans and NPAs with banks, the coming year will witness more of such instances.
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