In a recent development, the State Bank of India (SBI) has downgraded the term loan account of Mahanagar Telephone Nigam Limited (MTNL) to a Non-Performing Asset (NPA). This decision was made effective from September 28, 2024, due to non-payment of interest and loan installments. This means that MTNL has failed to make timely payments on its loans, pushing the account into an NPA category.
Mahanagar Telephone Nigam Limited (abbreviated as MTNL) is a wholly owned subsidiary of Bharat Sanchar Nigam Limited. Headquartered in New Delhi, India. MTNL Provides services in the metro cities of Mumbai and New Delhi in India.
Why Did SBI Downgrade MTNL’s Account?
According to SBI’s communication, MTNL’s account had an outstanding balance of over Rs 325.52 crore as of September 30, 2024. Out of this, an overdue amount of Rs 281.62 crore is required to regularize the account. SBI has made it clear that this amount is due immediately, and MTNL needs to pay it without delay.
The bank noted that 90 days have passed without any payments being made, which is the threshold for categorizing the account as an NPA. As a result, MTNL’s account has been classified as “Sub-Standard NPA” from September 28. SBI has requested the telecom company to make the necessary payments to upgrade the account status from NPA.
SBI Seeks Clarifications from MTNL
Interestingly, SBI has also sought clarification from MTNL regarding recent news reports suggesting that the Indian government would step in to clear MTNL’s dues. Some reports have stated that the Department of Telecommunications (DoT) assured that there would be no default. Based on these reports, SBI has asked MTNL to provide an update on the status of its loan facility.
Additionally, SBI is seeking more information about MTNL’s Land Monetization Plan, which was part of the strategy to raise funds and manage its debts. This plan includes an MoU that MTNL recently signed with NBCC to develop a 13.88-acre land parcel in New Delhi into residential and commercial space. The bank wants to know whether the proceeds from this development will be used to clear MTNL’s outstanding dues.
Potential Legal Action
SBI has also issued a warning to MTNL about the consequences of not paying its dues. If MTNL fails to make the payment in time, SBI stated it would be forced to start legal proceedings to recover the full loan amount, along with interest. The bank could also take other steps, such as enforcing securities (i.e., seizing assets to recover the funds).
MTNL’s Struggles with Other Lenders
MTNL is not just facing pressure from SBI. Other major lenders, including Punjab National Bank (PNB), Union Bank of India, and Bank of India, have also classified MTNL’s account as an NPA. In total, MTNL owes banks a staggering Rs 7,925 crore. The company’s financial struggles have become a major concern for its lenders, and unless MTNL can find a way to manage its debts, it may face significant challenges in the future.
- Union Bank of India: Rs 155.76 crore
- State Bank of India: Rs 140.37 crore
- Bank of India: Rs 40.33 crore
- Punjab & Sind Bank: Rs 40.01 crore
- Punjab National Bank: Rs 41.54 crore
- UCO Bank: Rs 4.04 crore
MTNL had previously borrowed Rs 5,573.52 crore from these banks. Overall, the company has a staggering Rs 7,925 crore in borrowings from various banks and financial institutions, and its total debt stands at Rs 31,944.51 crore.
What’s Next for MTNL?
MTNL’s situation is critical. With multiple banks classifying its accounts as NPAs and mounting pressure to repay its debts, the company must act quickly. The Land Monetization Plan and potential government intervention may provide some relief, but the immediate focus will likely be on finding a way to pay back the overdue amounts to avoid further legal complications.
This situation highlights the ongoing financial challenges in the telecom sector and the importance of timely repayments and strong financial management to maintain a healthy relationship with lenders.
