In a bid to avoid red ink on the bank balance sheet for a third quarter, lenders to Suzlon Energy have advanced the meeting to finalise the debt recast package on December 31.
Suzlon is still a treated as a standard account. With payments due for close to 90 days, the Suzlon account would have to be downgraded to the non-performing asset (NPA) category on close of business at the end of December. Initially, lenders were scheduled to firm up a package for a loan of over Rs 10,000 crore, in the second week of January 2013, a senior public sector executive said.
So if the debt is recast in January 2013, banks would have had to treat it as NPA and make provisions in line with regulatory norms. Once the account slips into the NPA category. It would carry NPA status even if it was restructured.
Any upgradation could be done only after one year on the basis of performance review. So this would have added to the provision burden all through.
Another PSB official said: "By recasting it in the third quarter, the bank will save Suzlon from NPA tag and also subsequent huge provisioning burden."
Bankers can review the account for upgradation only after one year.
The draft restructuring package for the Tulsi Thanti-controlled company includes interest rate concession, two year payment moratorium, extended repayment period and fresh working capital support.
The estimated hit the banks will take on account of the reduction in interest rate for the revised package is Rs 1,000 crore. The draft package involves promoters pumping in about Rs 250 crore. This may partly mitigate the sacrifice lenders make.
In October, Suzlon defaulted on redemption of foreign currency convertible bonds worth $220 million, after bond holders rejected a request for extension.