IDBI Bank to declare Kingfisher Airlines 'wilful defaulter'

T E Narasimhan  |  Chennai  

August 16, 2014 Last Updated at 23:02 IST

Public-sector lender IDBI Bank has said it is planning to announce liquor baron Vijay Mallya's Kingfisher Airlines as a wilful defaulter.

The bank, which has a Rs 750-crore exposure to the grounded airline, also clarified it had not been questioned by the Central Bureau of Investigation, though the agency had sought some information from it.

IDBI Bank is the second bank that could list Kingfisher Airlines as a wilful defaulter. Kolkata-based United Bank of India has served a notice on the airline asking why it should not be named a wilful defaulter. Kingfisher Airlines has moved court against the notice. State-owned United Bank of India has a Rs 400-crore exposure to the airline.

The Reserve Bank of India defines wilful default as a situation where an entity does not pay lenders even though it has the capacity to do so, or when it does not use funds for the purpose a loan was given. If a borrower uses short-term working capital for long-term purposes, not in conformity with the terms of a loan, or deploys the funds for creation of assets other than those for which the loan was sanctioned, it is construed as diversion of funds.

IDBI Bank Chairman & Managing Director M S Raghavan said the bankers' consortium was taking steps against Kingfisher Airlines. "We will declare (Kingfisher Airlines as a wilful defaulter) very, very soon. We have already taken it (the proposal) to the (bank's) board," he said and clarified IDBI Bank's exposure to the airline was Rs 750 crore, and not Rs 950 crore as reported in media reports.

IDBI Bank was the first bank to declare Kingfisher Airlines' default and it went to court to recall its loan. The bank is now taking the next step to recover its dues.

State Bank of India leads a consortium of 17 banks that had a total exposure of Rs 6,500 crore to the airline. After banks started their recovery process last year, the total dues are now about Rs 4,000 crore, according to finance ministry data.

In 2009, IDBI Bank sanctioned a loan of Rs 200 crore to Kingfisher Airlines. Subsequently, State Bank of India came out with an assessment saying the gap in the airline's working capital was around Rs 2,000 crore and many banks were approached, including IDBI Bank, which was asked to lend over Rs 1,000 crore.

"But we sanctioned only Rs 750 crore and of this Rs 250 crore was sub-tuned with the earlier sanctioned amount," Raghavan said.

Responding to recent media reports that claimed CBI had questioned IDBI Bank in the Kingfisher Airlines case, Raghavan said the agency wanted to see whether funds were diverted by the airline. If there is diversion it will show up in the airline's bank accounts, so all lenders were asked to provide information. IDBI Bank provided the information and CBI wanted more data, which was provided last Monday.

On the course of action against the airline, Raghavan said RBI Governor Raghuraman Rajan had recently stressed on tigthening the bankruptcy law. "So, we can declare the company insolvent. I am not suggesting this is what we will do. We have an option and the bank can go to any extent," he added.

The bank also said it was looking at mobilising funds through various modes, including selling its stake, partially or fully, in the National Stock Exchange, rating agency CARE and others. "As promoters, we have good stakes in most of these organisations. In NSE and CARE alone, if we divest now, we can easily mobilise Rs 1,000-1,200 crore," said Raghavan.

Raghavan said the bank would need around Rs 6,000 crore of capital over the next two years. It had set a target of around 20 per cent growth annually and about Rs 6,000 crore of capital, besides another Rs 4,000 crore of Tier-I capital, would be required to support that. "We have approached the government for capital infusion, this is the first choice. My assumption is we will get at least Rs 1,000 crore from the government." At present, the central government holds a 76.5 per cent in IDBI Bank. "We have written to the government to lower its stake to 58 per cent or 51 per cent," said Raghavan, adding around Rs 4,500 crore could be mobilised if the stake was brought down to 58 per cent, and Rs 5,500 crore if it came down to 51 per cent.

NPAs are a concern, but no reason to panic: IDBI chief

• Image Credit: Courtesy: IDBI
• M.S. Raghavan

 10 Mar 14

Dubai: India’s banking sector is facing a challenging environment as slowing economic growth has exacerbated the increase in non-performing assets (NPA), but there is no reason to panic as most banks have the capability to augment capital buffers, M.S. Raghavan, chairman and managing director of IDBI Bank toldGulf News.

IDBI Bank, formerly Industrial Development Bank of India (IDBI) was a development financial institution that was converted into a public sector commercial bank in 1994. Raghavan attributes the rising NPAs to cyclical and structural factors.

“Non performing loans (NPLs) are closely linked to the growth cycle. From 1992 India was growing consistently at 6 per cent on an average and went up all the way to peak at 9 per cent. Commensurate with that the NPLs were shrank to as low as 2 per cent. In the past three and half years we have seen that not only the growth has topped out, but has started declining and with the decline in growth the NPLAs too have started rising,” said Raghavan.

A slowdown in economic growth combined with excess capacity in the economy adversely impacted the NPL situation. IDBI Bank’s third quarter net profit dropped 75 per cent to Rs1billion compared to same quarter last year, dented by a steep fall in non-interest income and slow growth in net interest income. Asset quality of the bank worsened during the quarter. Gross non-performing assets (NPA) increased 177 basis points to 5.44 per cent and net NPA climbed 100 bps (11 bps quarter-on-quarter) to 2.93 per cent compared to a year ago.

Apart from the slowing economy, Raghavan attributes historical a structural reasons for the current NPL situation of the bank.

“We were a development financial institution that was converted into commercial bank. Historically balance sheet was largely exposed to corporate and infrastructure sectors. Even today 76 per cent of our portfolio is committed to corporate sector and about 24 per cent to retail sector,” he said.

Capital infusion

As a result of rising NPLs and lower profitability, provision expenses of most banks rose in the first three quarters of the year. Additionally the introduction of Basel III raises the amount of capital that Indian banks will need to meet minimum targets.

With its tier-I capital adequacy ratio below eight per cent, IDBI Bank plans to achieve it above eight per cent by the end of March. In an effort to augment capital, IDBI has been in talks to sell some of its strategic stakes it owns in other companies.

“By the March 31 this year, our tier 1 common equity will be 7.1 per cent. We will like to have our common equity at 8 per cent or above. There is no compulsion on us to do it immediately. As per the Reserve Bank of India requirement we need to achieve it only by 2018. But as an acceptable practice in India we feel that our common equity has to be approximately 8 per cent,”

The bank recently made an attempt to sell its 17 per cent stake in credit rating agency Credit Analysis and Research Ltd (CARE), but the deal fell through, as the price was below its expectations of Rs900 (Dh53.97) a share. The bank is now attempting to sell a part or full stake in Stock Holding Corporation of India Ltd (SHCIL) in which it owns 18.9 per cent equity in SHCIL. In addition to sale of these strategic stakes, the bank is also understood to be seeking to raise $300 million (Dh1,102 million) through a Basel III compliant bond issue.

Lenders approve Lanco Infra’s debt restructuring plan

BL : Rishikumar 12 Dec 2013

In a major relief to cash-strapped Lanco Infratech Ltd, a consortium of lenders, headed by IDBI Bank Ltd, on Wednesday approved a corporate debt restructuring (CDR) package for the holding company.

The decision to clear the Rs 7,000-crore CDR package and release Rs 3,500 crore towards working capital will enable the company to resume EPC (engineering, procurement and construction) operations, which were hit by a cash crunch, said T. Adibabu, Chief Operating Officer, Finance, Lanco Infratech. After securing the approval at the CDR Empowered Group meeting held in Mumbai, Adibabu toldBusiness Line that a majority of the 27 banks in the consortium has cleared the package and the remaining few are expected to conclude the process soon.

The whole process will be completed before the month-end. “Within a week, we expect to get a letter of approval which will also outline various terms,” he said.

Under CDR, banks typically increase the repayment period of loans to stressed borrowers, offer a moratorium and reduce lending rates. A CDR is approved if at least 75 per cent of the creditors by value of the loan and 60 per cent by number back the proposal.

Lanco hasn’t released the details of its CDR package.

“With the CDR package through, the company will now have access to Rs 3,500 crore, which includes Rs 2,500 crore as fund-based money and the Rs 1,000 crore as non-fund. This will enable us to resume EPC works and pay up contractors and others. The company has more than Rs 25,000-crore worth of contracts,” Adibabu said.

The diversified infrastructure company has had to pass through several tough quarters amid low plant load factor at its power stations hit by fuel concerns and slow execution of EPC contracts due to regulatory delays. To add to this, the cash flows, too, were hit. The company had posted a loss of Rs 581 crore in the second quarter ended September 30. The company has a total debt of Rs 36,000 crore. While its initial concern is about the debt, analysts believe it will be several quarters before the situation turns around for the company.

DIVESTMENT

Lanco Infra had earlier hinted at divesting a stake in some projects, including at Udipi, Budhil, Babandh and other road projects. It is also seeking to divest a stake in its solar power project. However, the market conditions and investor sentiment had impacted the stake sale process.

“We hope to conclude these as the sentiment gets better and international and domestic investors see good times ahead,” Adibabu said.

A short-term breather Under CDR, banks typically increase the repayment period of loans to stressed borrowers, offer a moratorium and reduce lending rates. A CDR is approved if at least 75 per cent of the creditors by value of the loan and 60 per cent by number back the proposal.

(This article was published in the Business Line print edition dated December 12, 2013)

Maharashtra government to pay Rs 30,000 to IFCI, IDBI for its "lethargy, negligence, in-aptitude and carelessness".

Source : Business Standard January 18,2003



DRAT asked Maharashtra government to pay Rs 30,000
 to IFCI, IDBI for its "lethargy, negligence, 
in-aptitude and carelessness".


The Debt Recovery Appellate Tribunal (DRAT) has ordered the Maharashtra government to pay Rs 30,000 as "costs" to IFCI Ltd and the Industrial Development Bank of India (IDBI) within a day for its "lethargy, negligence, inaptitude and carelessness".

The tribunal has also been asked to deposit Rs 28 crore within two months, before its appeal against the Mumbai debt recovery tribunal (DRT) order can be taken up for hearing.

Justice Pratibha Upasani, chairperson of the DRAT, came down heavily on the state government saying: "Apparently, a false statement has been made by the state government that it came to know of the DRT order in 2002."

The DRAT orders were issued on Wednesday and Friday on the applications filed by the state government for a "condonation of delay" in filing its appeal against the DRT's order of July 10, 2001, and an application for waiving the requirement to deposit 75 per cent of the decreed amount before its appeal could be taken up for hearing.

The state government had sought a waiver of the condition that 75 per cent of its dues decreed by DRT-II, Mumbai, be deposited within two months before the "compliance hearing" could be taken up by the DRAT on March 17, 2002.

Says a legal source: "The waiver can be granted only if the appellant can prove his economic condition is weak.  The Maharashtra government counsel made no such submission in the application."

Justice Upasani said: "In the application for condonation of delay, government counsel Ranjan Dharmadhikari submitted though the delay was of 466 days, it was not intentional.  He submitted the judgement and order were passed ex parte and the state government came to know about it on October 10, 2002.  It is, therefore, evident the appellants did not respond to the proceedings."

The judge's order said: "The application for condonation of delay is hereby allowed subject to payment of Rs 30,000 equally to IFCI and IDBI by Thursday."