Troubles for banks, especially for public sector banks (PSBs), are far from over. First, it was the Reserve Bank of India's asset quality review (AQR) that resulted in huge NPA provisioning and losses in the books. Then, just when banks were close to clean up their books from stressed assets, the crisis in infra financing institution IL&FS hit them hard. The total debt exposure in IL&FS including that of banks was over Rs 90,000 crore. Soon, Jet Airways joined in as another surprise stressed asset, although banks did not have much exposure in the airline. The latest stressed asset that has joined the list is Dewan Housing Finance, a non-banking housing finance company (NBFC), which had an outstanding loan of close to Rs 40,000 crore until September 2018, when the liquidity crisis first erupted.
While Dewan Housing is not an NPA in the books of banks, the huge exposure is now giving sleepless nights to bankers. The rating agencies have already downgraded the investment grade ratings given to Dewan Housing. The stock market is also punishing its stock as efforts to bring in strategic investors haven't yielded any results.
This is how the loan exposure is distributed among banks: Among total 29 banks, the State Bank of India (SBI) has the highest term loan and cash credit exposure of Rs 8,328 crore as on September 30, 2018. The other big banks are Bank of India (Rs 4,015 crore), Bank of Baroda (Rs 3,814 crore), Union Bank Of India (Rs 2,154 crore), Canara Bank (Rs 2,119 crore) and IDBI Bank (Rs 1,096 crore). The other banks with over Rs 1,000 crore exposure includes Indian Bank, Oriental Bank of Commerce, Punjab National Bank, Syndicate Bank and Central Bank.
The private sector banks with exposure to Dewan Housing includes ICICI Bank (Rs 108 crore), Axis Bank (Rs 65 crore), DCB (Rs 18 crore), Federal Bank (Rs 193 crore) and HDFC Bank (Rs 573 crore). However, the private sector banks have largely stayed away from taking higher exposure in NBFCs such as Dewan Housing Finance.
The repayment schedule of these banks by Dewan Housing is not known, but the NBFC claims to have repaid creditors including fixed deposit holders to the tune of Rs 30,000 crore in the last six months.
Currently, Dewan Housing is not an NPA for banks, but banks are worried the way things are unfolding. "We don't want any surprises. We have to be ready in terms of provisioning to avoid any big hit in future," says a banker. Many banks are already cautious in lending further to NBFCs. They are instead evaluating proposals to buy out retail portfolios. Dewan Housing is already in the market to sell down its assets to generate liquidity.