InvestorQ : If Vodafone is unable to pay up the AGR charges and the company gets liquidated, then would the banks be hit in a big way?
Deepa Salunkhe made post

If Vodafone is unable to pay up the AGR charges and the company gets liquidated, then would the banks be hit in a big way?

Answer
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Juvina Maggie answered.
8 months ago


That is perhaps the biggest risk for the banks at this point of time; more than for Vodafone. Their exposure to Vodafone is huge at this point of time and they are just about coming out of the NPA mess over the last few years. Banks have fund-based exposure of Rs.70,000 crore and non-fund based exposure of Rs.31,000 crore to the telecom sector. That takes the total exposure to above Rs.1 trillion. For banks like Yes Bank and IndusInd Bank, the exposure to the telecom sector is above 30% of net worth. Even HDFC Bank has a huge exposure to the telecom sector and that could hit its bottom line in a big way. These banks could come under tremendous stress and this could only worsen things for them. In the case of most of the banks, the exposure to telecom is more than 2.5% of the bank book. A good deal will now depend on how quickly the government, DOT and the telcos sit across the table and iron things out in an amicable manner. In fact, it is high time the government gets positively involved in the process and help sort things out to avoid an embarrassment for the banks.