The last United Democratic Front (UDF) government’s liquor policy has an unintended casualty: the coffers of the government-funded Kerala Financial Corporation (KFC).
The KFC had advanced hefty loans to the once-thriving bars dotting the State, but the abrupt closure of hundreds of these bars has turned those loans into Non- Performing Assets (NPA) overnight. The loan portfolio of the corporation included loans extended to 221 hotels, (182 hotels that subsequently lost their bar licence and 39 more that were started, expecting to get bar licences) before the curbs took a toll on their revenue. The total principal outstanding in these accounts now stands at Rs.529.05 crore, which translates to 22.04 per cent of the KFC’s total loan portfolio.
Eating into profits
Of these, about Rs.182 crore was in default, pushing the NPA of the corporation to above 10 per cent. “This is against the banking average of 5 per cent,” M.G. Rajamanickam, managing director, KFC, told The Hindu .
While the corporation continues to register book profits, the burgeoning NPA eats into it. “It also compromise our borrowing capacity seriously,” Mr. Rajamanickam said.
In talks
The KFC is in talks with asset reconstruction companies, including that of the Small Industries Development Bank of India, which incidentally is also a shareholder of KFC, to address its NPA problem.
“Disposing of dead assets would clean up our balance sheet. Subsequently, it will improve our credit rating and significantly enhance our borrowing capacity,” Mr. Rajamanickam hoped.
Burgeoning NPAs eating into profits, compromising borrowing capacity, says MD
