The Ruia brothers backed Essar Steel is now a bad asset with Bank of India. According to the bank officials, the auditors have observed that the entire Rs 500 crore exposure to Essar steel should be classifed as NPA in the fourth quarter.
These officials add that the account was treated as a bad loan on technical grounds and expect it to be upgraded in the coming months. In the fourth quarter, HDFC Bank had also classified the account as a non performing loan and sold off the entire Rs 500 cr exposure of Essar Steel to an asset reconstruction company.
For other banks, this account is a standard account, however continues to be closely watched. Bankers say the account is currently in the SMA II ( Special mention accounts) category as the company has interest and principal overdues for 61-90 days.
The company is currently in talks with these big lenders to refinance the debt under the new flexible financing arrangement also called the 5:25. The scheme allows banks to extend the repayment schedule of infrastructure companies to 25 years with the option of refinancing the loan at the end of every five years.