Mumbai: Banks are likely to take a haircut of Rs 2.4 trillion, or nearly 60 per cent, to resolve 50 large stressed accounts, said a Crisil report today.
These 50 companies are from the metals (30 per cent of total debt), construction (25 per cent) and power (15 per cent) sectors, and account for half of the Rs 8 lakh crore non-performing assets (NPAs) in the banking system as on March 31, 2017.
"Banks may have to take a haircut of 60 per cent, worth Rs 2.4 lakh crore, to settle 50 large stressed assets with debt of Rs 4 lakh crore," the rating agency said.
The haircuts have been classified into four categories marginal (less than 25 per cent), moderate (25-50 per cent), aggressive (50-75 per cent) and deep (more than 75 per cent). A quarter of the debt analysed needs marginal or moderate haircuts, while a third needs aggressive, and nearly 40 per cent deep haircuts, the report said.
Companies from the power sector would require moderate haircuts, while those from the metals and construction sectors would need aggressive ones," the rating agency's chief analytical officer, Pawan Agrawal, said.
A majority of the debt requiring deep haircuts belong to companies with unsustainable businesses so asset sales are necessary to recover monies, Crisil said.
Companies needing moderate or aggressive haircuts had gone for debt-funded capex but then demand slumped, or had projects that ran into regulatory issues leading to significant time and cost overruns that made them unviable.
Companies needing marginal haircut are those facing temporary setbacks, which could be corrected over time, the report said. "It would be in the larger interest of the economy to pop the bitter pill of haircut than kick the can down the
road," the rating agency said.