RCom’s unpaid loans could be termed NPAs, and banks are worried

Banks that Reliance Communication owes money to are getting increasingly worried about the possibility of more than Rs 40,000 crore becoming non-performing assets (NPAs).

In the recent past, three rating firms have downgraded the company's debt because of missed payments.

If these loans turn into NPA, the country’s banking system, which is already marred by a heavy debt burden of more than Rs 12 lakh crore, will get weighed down even more.

This worry has led to a consortium of more than 20 banks led by State Bank of India (SBI) forming a joint lenders forum (JLF), which is a proactive measure so that accounts can be prevented from turning into an NPA.

These lenders are expected to meet as early as next week so that they can work out a restructuring plan for these loans.

RCom has, on its part, assured banks that it will pay back about Rs 25,000 crore by September after it sells its telecom towers business to Brookfield Infrastructure and merges of its wireless operation with Aircel.

"For these transactions, the company is in the process of obtaining necessary approvals, of which it has already received some approvals," the company said in a regulatory filing. "On completion of these transactions, the residual entity will be left with a lower quantum of debt. However, the debt coverage metrics of the residual entity are expected to remain subdued."