The Indian steel industry has petitioned the Reserve Bank of India (RBI) and the Ministry of Finance seeking a bailout package including a special financial institution to take over all bank loans extended to steel companies, an official at India’s Ministry of Steel said on Friday, September 11.
The official said that steel companies represented by the Indian Chamber of Commerce (ICC) in a communication to the RBI and finance ministry have pleaded for an institution on the lines of the Power Finance Corporation (PFC) which will take over all outstanding bank debts of steel producers and infuse fresh equity funds to ease the level of distress faced by domestic steel mills.
The industry as represented by the ICC said that banks should also take up restructuring of loans extended to steel companies and that in such cases banks should be exempted from making provisions on their accounts against such restructured loans.
At present, banks have to make provisions to the extent of five percent of all loans restructured, the official said.
According to a recent RBI report on the financial stability of commercial banks, five of the top Indian steel companies can be classified as “under severe stress.”
Of the total $50 billion of bank loans extended to Indian steel companies, as much as $30 billion have been classified as “stressed and carrying risk of default within the next two financial years”, a bank report said.