Future Retail recently defaulted on its loan payments, and now its lenders are moving the RBI to seek an exemption on the declaration of the loan being a non-performing asset (NPA). Lenders to the company are going to approach the central bank in order to either seek a delay or exemption to the company’s loans being declared as NPAs, reported the Mint.
“This is an exceptional case where the account could soon turn non-performing because a deal, despite being signed over a year ago, is stuck in long-drawn litigation. It seems unlikely that the company would be able to sell non-core assets in 30 days and repay," a top banker with knowledge of the matter told the Mint.
Future Retail was supposed to pay its lenders a total of Rs 3,494.56 crore on or before December 31, though the company announced that it had failed to make its payments due to the ongoing legal proceedings against Amazon India. The company had already taken a 19-month loan moratorium as well. The lenders to Future Retail include Union Bank of India, Bank of India, Bank of Baroda, State Bank of India, Indian Bank, Central Bank, Axis Bank and IDBI Bank, and the company has an outstanding debt of Rs 6,278 crore to the banks, reported Care Ratings.
Future Retail now has 30 days to repay lenders if it wishes to avoid the NPA label. If it is unable to do so, which seems entirely possible as arbitration proceedings are still continuing at the Singapore International Arbitration Centre, then banks would have to take provisions as if the company’s debt recast never occurred. This would require the banks to retain 25 percent of the provisions subsequently. A Future Group unit has moved the Delhi High Court to quash the arbitration proceeding, in the meanwhile.
“We cannot approach RBI just based on the recent Competition Commission of India (CCI) order and will have to wait for a court to rule on the petition filed by Future seeking to quash the arbitration proceedings. If the court entertains the plea, we could then build our case of an extension citing extraordinary circumstances," the banker told the Mint.
