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Banks set to classify ₹35K Cr loans to SREI as NPA

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Several banks are mulling to classify loans worth ₹35,000 crore given to SREI group as non-performing assets, by the end of the current quarter ending September, after the National Company Law Tribunal (NCLT) overturned a previous order barring the lenders to take the step.

A classified loan is a bank loan that has outstanding interest and principal which have not been paid.

“We were expecting Srei to be classified as NPA and, hence, had already started setting aside provisions,” LiveMint quoted a top banker at a reputed public sector bank as saying.

The NCLT in an order on September 7 overruled a December 2020 order issued by the Kolkata bench of the National Company Law Tribunal which barred banks from categorising any non-payment of dues by SREI Infrastructure Finance and SREI Equipment Finance as default until a scheme of arrangement is signed by all creditors including banks and bond holders.

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Reports said while many banks have already categorised the loans granted to the SREI group as stressed loans in the previous quarter, they will initiate accelerated provisioning in the September quarter. Under the accelerated clause of a contract, a lender can demand the borrower to repay all of the outstanding loan if the latter fails to fulfil certain requirements.

Reports said public sector lenders like Indian Bank and Canara Bank have credit exposure (potential loss due to default by borrower) of around ₹2,000 crore and ₹1,200 crore respectively, to SREI, while private sector banks like ICICI Bank and Axis Bank have ₹800 crore each.

The Kolkata-based group, since 2019 has been trying to merge both its companies – SREI Infrastructure Finance and SREI Equipment Finance. In a relief for the group, the NCLT in its December 2020 order had ordered banks and other lenders not take any coercive action against the company after it petitioner the tribunal seeking moratorium on coupon payments and postponement of redemption dates until the merger is successfully carried out.

The group has been trying to raise ₹2,500 crore through various means after the board gave approval for the same. The company’s subsidiary SREI Equipment Finance Ltd had investment proposals worth ₹4,200 crore from US- and Singapore-based companies, reports said.

SREI Infrastructure Finance Limited has three main categories of business, namely, ‘fund based,’ ‘fee-based,’ and ‘strategic investments.’ The company, listed under Public Financial Institution (PFI) by the Union Ministry of Corporate Affairs (MCA), was incorporated on March 29, 1985. The company’s first public issue was in 1992.

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