Bankers to conduct marathon meetings to deal with stressed cases

Bankers also intend to evaluate the feasibility of a new financial structuring scheme introduced by the Reserve Bank of India in June

In March, lenders had held similar meetings over two days, where almost all large stressed cases were taken up and tough measures to counter stress were discussed

Lenders, led by State Bank of India (SBI) and ICICI Bank, will conduct extensive joint lender forum (JLF) meetings with the managements of at least 10 stressed firms this month, two people in the know said. Apart from taking stock of progress of these accounts, bankers also intend to evaluate the feasibility of a new financial structuring scheme introduced by the Reserve Bank of India in June.

According to one of the two persons quoted above, an official at a large state-owned lender, this is a quarterly process where banks talk to large stressed companies to monitor the progress of previously approved resolution plans and to decide on new recovery strategies. The banker spoke on conditions of anonymity as he is not allowed to be quoted in the press.

In March, lenders had held similar meetings over two days, where almost all large stressed cases were taken up and tough measures to counter stress were discussed. The companies that banks had met included Visa Steel Ltd, Uttam Galva Steels Ltd, Adhunik Metaliks Ltd, Aban Offshore Ltd, Bhushan Power & Steel Ltd and Bhushan Steel Ltd.

In many cases, banks had asked managements to implement these measures and show results by June end.

“We have already mandated necessary evaluation tests in almost all large stressed cases. In the meetings, we are only focussing on cases where the evaluation tests have established viability. In the other cases, we may look at some other stricter measures,” said the second person quoted above, also speaking on condition of anonymity.

An evaluation test is needed to establish viability if banks choose to go with the Reserve Bank of India’s (RBI’s) newly introduced scheme, Scheme for Sustainable Structuring of Stressed Assets (S4A). Under S4A, which was introduced last month, banks can convert up to half the loans held by corporate borrowers into equity or equity-like securities.