Banks have ₹20,000-cr exposure to IL&FS

Surabhi

Banks have reported an exposure of nearly ₹20,000 crore to debt-ridden Infrastructure Leasing and Financial Services (IL&FS), and could see further pain in their balance sheets in the coming quarters, though much would depend on the resolution process, according to analysts.

Cumulative exposure

Data compiled by BusinessLine revealed that as many as 14 public and private sector lenders have a cumulative exposure of ₹18,256 crore to the IL&FS Group in their quarterly results, though not all of it has been categorised as ‘non-performing’.

State Bank of India, Bank of India and Bank of Baroda have announced the highest exposure to IL&FS in their third-quarter results, although some of it is still performing.

SBI, for instance, has an exposure of ₹900 crore to IL&FS, for which it has increased the provision to 50 per cent. It also has an exposure of ₹2,200 crore to 12 special purpose vehicles of the group, but these loans are still performing.

Similarly, Bank of India, which reported a net loss of ₹4,738 crore in the quarter ended December 31, 2018, said it has an exposure of ₹3,400 crore.

Private sector lenders

Among the private sector lenders, HDFC Bank, ICICI Bank and Kotak Mahindra Bank are understood to have negligible exposure to the infrastructure group, while Axis Bank has about ₹800 crore of loans. Private sector YES Bank, which posted a near 7 per cent drop in its profits in the third quarter, also had an exposure of ₹2,529 crore to various SPVs of IL&FS, though it did not name it specifically.

“Elevated slippages from accounts under IL&FS offset strong improvement in overall asset quality for most banks under coverage – 80 per cent of overall slippages for YES Bank, 30 per cent for Bank of Baroda and 7 per cent of slippages for Axis Bank were from accounts under IL&FS,” said a report by Kotak Institutional Equities, on the third-quarter performance of banks.

According to a November 2 research report by Bernstein, the aggregate debt of IL&FS amounted to ₹94,200 crore, of which, nearly 40 per cent is owed to state-owned banks. In all, the group accounts for 0.6 per cent of the total banking credit, the report said, adding that its top five creditors to the group are SBI, Bank of Baroda, Power Finance Corporation, Bank of India and IndusInd Bank.

“Most of the private sector banks with large exposures to IL&FS have disclosed it, like IndusInd and YES Bank, which cumulatively have ₹5,600 crore exposure to the group.

“However, there have been differences across banks in classifying the exposure as NPA,” said Bernstein analysts Gaurav Jangale and Monica Agarwal, adding that recognition of IL&FS exposure as NPA will be a one-off event, leading to higher NPA ratios.

However, higher credit costs will put pressure on future profitability, especially if resolution drags on, they further said.

Banks, through the Indian Banks’ Association, are likely to seek another relaxation from the Reserve Bank of India to defer the provisioning requirements for their exposure to IL&FS.

“Most banks will see some more pain in the fourth-quarter results, but it will be a one-off pain. I don’t think there will be a significant impact as lenders will manage to get at least a part of their money.

“But it will depend on the resolution plan,” said another analyst who did not wish to be named, adding that the impact of the unfolding developments at Dewan Housing Finance will also have to be seen.

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