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In view of the problematic derivative deals, Axis Bank has made a contingent provision of Rs 71.97 crore as it is legally contesting two cases filed by two companies.

The bank has been active in structuring derivatives transactions for companies including various types of cross-currency options and swaps. At the end of March 2008, there were 188 transactions structured by Axis in which the companies had an aggregate Marked-to-Market (MTM) loss of Rs 673.55 crore.

Out of these, six transactions had been repudiated by two customers involving an MTM loss of Rs 71.97 crore, and they filed cases in the courts. “Though the bank is legally contesting these cases, as a measure of prudence it has made a full provision for the MTM losses of the two companies. However, none of these transactions have turned into non-performing assets,” the bank said in a release.

According to RBI guidelines, any such outstanding contract would be classified as an NPA 90 days after there is default in a payment to be made to the bank.

More Stories on : Private Banks | Derivatives Markets | Courts/Legal Issues

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