Banks express concern over stress in telecom sector

Four large banks that met an inter-ministerial group (IMG) on Wednesday expressed concern over "stress" in the telecom sector and flagged the possibility of loan default by operators.

The IMG met officials from four leading banks – State Bank of India, Punjab National Bank, Axis Bank and HDFC Bank on financial difficulties being faced by the telecom industry, whose debt burden stand at a whopping Rs 4.6 lakh crore.

"They (banks) say that the telecom sector may be in stress and there can be defaults," sources familiar with the development said.

The banks in the two-hour meeting talked about measures that can be taken to enhance liquidity.

Sources further said that SBI's exposure to the telecom sector is to the extent of Rs 80,000 crore.

They added that the IMG may meet the banks once more but the date has not been finalised yet.

The IMG, comprising officials from ministries of communications and finance, is meeting operators and lenders to discuss financial difficulties being faced by the industry, and measures that can be taken to ease the situation.

Last month, SBI chairman Arundhati Bhattacharya in a letter to the telecom secretary had expressed concern over the stress in the telecom 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 erosion of topline and EBITDA of the telecom service providers," the letter said.