Banks informs IMG about the stress in telecom sector

Four major banks (State Bank of India, Punjab National Bank, Axis Bank and HDFC Bank) today met an inter-ministerial group (IMG) and informed that there is a stress in the telecom industry.

The telecom sector's debt is estimated to be over Rs 4.6 lakh crore.

"The bankers are worried and said that there can be defaults unless some solution is found soon," sources close to the development said. Adding that SBI's exposure alone to the telecom sector is around Rs 70,000 crore.

Sources also said that the bankers are going to meet IMG again soon.

"There is a stress in the sector and that there is an urgent need to find a solution," one of the bank officials said.

The official further added that revenues in the sector were coming down and this may further worsen the situation.

Meanwhile one of the bankers also said it has suggested steps like reducing levies by Government, extending loan repayment tenure and infusing promoters' money into companies to improve liquidity.

To recall SBI chairman Arundhati Bhattacharya last month had also expressed her concern over the stress in the sector reaching "unsustainable levels".

"The stress in the sector has reached highly unsustainable levels after the entry of new players and launch of free services which led to an erosion of topline and EBITDA of the telecom service providers," she said.

The letter said that the total EBITDA of the sector on an annualized basis is Rs 65,000 crore which is "clearly unsustainable" for a debt of more than Rs 4 lakh crore.