Banks will end up paying the price if telecom companies file for bankruptcy

Posted by B2B on February 17th, 2020

Mr Rajnish Kumar, the Chairman of the State Bank of India said in a statement, the Banks will “have to pay the price” in the case of any of the telecom company filing for bankruptcy. The statement was made one day after the Supreme Court's decision that the telecom firms will have to mandatorily pay the Rs 1.47 lakh crore in AGR dues (Adjusted Gross Revenue).

According to Mr Kumar, the SBI is in a  "wait-and-watch mode" currently. He further added that the onus of ensuring telecom companies' compliance with the order of the Supreme Court lies with the Department of Telecommunications under the Government.

"If there will be a negative impact on any of the enterprises then it will eventually impact the larger ecosystem, whether it is the banks, or whether it is the employees, the vendors, the consumers, and others hence everybody will get impacted.

So when that impact will happen,  then, we will have to pay the price," Kumar said. This was said in reply to the question that was asked about the impact on the banks if any is the telecom companies may move towards bankruptcy.

The Chairman had been speaking to the reporters on the sidelines of the unveiling at the local head office of SBI located in Mumbai. The artworks including 'Manasvi' and 'Tapasvi' had been unveiled. More than 400 computers, above 2,000 microchips, and over 400 keyboards and more than 200 discarded credit cards have been used to create both the artworks.

As per the SBI Chairman, the closure of any of the corporates will be impacting the Indian economy and, as a result, the attempt is to prevent the shutting down of any of the firms.

When it was asked if any of the telecom accounts have been classified as a non-performing asset (NPA), the Chairman said that there are two accounts, including Aircel and Reliance Communications Ltd. Both of these telecom accounts are undergoing bankruptcy proceedings.

On Saturday, 15th February 2020, the Reserve Bank of India Governor Shaktikanta Das said in a statement that the central bank will undergo internal discussions in the case of any issues arising out of the order of the Supreme Court order related to the adjusted gross revenue (AGR) dues which will be paid by the telecom firms.

On Friday, 14th February 2020, the apex court had threatened the contempt proceedings that took place against the top-level executives of Bharti Airtel, Vodafone Idea as well as the other telecom companies for not being able to comply with its directive to pay about Rs 1.47 lakh crore in past dues.

Although Mr Das had not given any comments about the Supreme Court order, that may have consequences on the banks in terms of their exposure to the financially-stressed telecom firms.

The payments that need to be made by these firms include Rs 53,000 crore by Vodafone Idea, Rs 35,500 crore by Bharti Airtel and Rs 14,000 crore by the now-defunct Tata Teleservices.

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