Private sector lender Axis Bank said on Tuesday that it has classified its loans to Deccan Chronicle Holdings Ltd (DCHL) as non performing asset (NPA), triggering possibility of other lenders also following suit.
The executive director of the bank Somnath Sengupta said in Kolkata, “We have declared (the loans to) Deccan Chronicle as NPA. We provided adequately against this exposure.” Though he declined to specify the amount, analysts said the amount is about Rs 400 crore.
DCHL, that publishes Deccan Chronicle, Asian Age, Financial Chronicle and Andhra Bhoomi, has outstanding loans to public sector banks, private banks and some non banking finance companies, has been in trouble for some time now, with its inability to service debts that is pegged anywhere from Rs 3,000 crore to Rs 5,000 crore.
While the complete lender-wise exposure is not clear, analysts said that the top four-five lenders comprise ICICI Bank (Rs 490 crore), Canara Bank (Rs 300 crore) , Yes Bank (Rs 250 crore) and Andhra Bank (Rs 200 crore). Other lenders include IDFC (Rs 100 crore), IndusInd Bank (Rs 100 crore), Corporation Bank (Rs 100 crore) and Religare Finvest (Rs 100 crore). Besides, some other lenders are also believed to have exposure to DCHL.
The move could spell trouble for DCHL if other lenders start contemplating such a move, straining its cash flows, apart from invoking personal guarantees given by the promoters. However, they are playing the waiting game as of now. The Chief Risk Officer of Religare Finvest, Kanchan Jain, said, “We do monitor our exposure to various accounts regularly, but can't comment on this one right now.”
Early last month, Canara Bank had appointed audit firm Deloitte to conduct a forensic audit of its books of accounts, as informed by department of financial services secretary D K Mittal. The government was also keen on studying the risk of systemic failure, given the lending by so many banks, especially public sector banks.
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