Rs. 185 crore Loan NPA in Union Bank; Bank announces Possession of Property

M/s Kallam Textiles Limited Represented by Sri Poluri Venkateswara Reddy (Managing Director) and Sri Gurram Venkata Krishna Reddy (Joint Managing Director) has defaulted in loan repayment of Rs. 185,35,71,199.66 ((Rupees One hundred and Eighty-five crore Thirty-five lakh Seventy-one thousand One hundred and Ninety-nine and Sixty-six paise only).

Kallam Textiles Ltd. is one of the largest producers of Spun Yarn for knitting and weaving industries in Andhra Pradesh.

Union Bank had issued a demand notice dated 11.09.2024 and borrower had to repay the loan within 60 days from the date of receipt of the said notice under SARFAESI Act. Since, the borrower has failed to repay the loan, the Bank has taken possession of the property.

Kallam Textiles reported a net loss of Rs 1,796.74 crore for the quarter ended June 30, nearly doubling from the Rs 937.01 crore loss recorded in the same period last year. The company’s revenue from operations declined to Rs 4,579.13 crore, down from Rs 5,242.60 crore year-on-year. This shows the decrease in business and profit of the company.

Huge Loan from Other Banks

The company is grappling with significant financial distress, reporting total outstanding dues to banks of Rs 29,981.16 crore as of June 30. This includes:

• Interest on term loans and working capital loans: Rs 5,654.93 crore
• Term loan installments: Rs 9,241.46 crore
• Working capital loans (repayable on demand): Rs 15,084.75 crore

Banks have classified Kallam Textiles’ loans as Non-Performing Assets (NPAs) and have initiated recovery proceedings under the SARFAESI Act. The company is currently in negotiations with lenders for loan restructuring.

What is SARFAESI Act?

The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (also known as the SARFAESI Act) allows banks and other financial institutions to auction residential or commercial properties of defaulters to recover loans.

If borrower defaults on repayment of a loan and their account is classified as Non performing Asset by secured creditor, then secured creditor may repossess the security asset before expiry of period of limitation by written notice.

The law does not apply to unsecured loans, loans below ₹100,000 or where remaining debt is below 20% of the original principal.