‘Steel industry is the largest contributor to the banking system’s overall NPAs’
The capital-intensive steel industry is considered the largest contributor to the banking system’s overall non-performing assets (NPAs), with the top five steel companies — Essar Steel, Monnet Ispat, Bhushan Steel, Electrosteel Steels and JSPL — seen having the maximum NPA problems, according to an SBI research report.
The aggregate debt of the five companies stood at Rs. 8,289 crore at March-end 2016, the report said and added that with a stressed advances ratio of 45.8 per cent for March 2017, iron and steel (industry) advances is about 76 per cent of advances to basic metal and metal products.
Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI, said: “The Steel Ministry is aiming to resolve the NPA issue in the steel sector…The three ministries — Finance, Steel and PMO — coming together to solve the problem is a welcome move, and is expected to clear the major roadblock for the banking sector to lend loans.”
The report assessed that the steel sector, per se, has its own share of problems with companies not funding their portion of equity to ramp up the net worth. This has led to the sector getting a bad name for few constituents not adhering to their commitments, it added.
“The sector is also a net forex spender. It also needs to focus on import substitution products,” the report said. However, some of the integrated steel players may undergo consolidation and revive hopes when demand for steel inches up.
The report said the Indian steel industry is now more dependent on government policies based on anti-dumping duties and rationalisation of import duties.