The banking sector may feel the heat of the Supreme Court dismissing the review petition filed by telecom companies.

The lenders could face some stress in their exposure to the sector, estimated at over Rs one lakh crore. This comes at a time there has been some relief on the NPA front.

Recently, the Reserve Bank of India (RBI) disclosed in a report that after rising for seven consecutive years, the gross non performing asset (GNPA) ratio of all commercial banks declined in 2018-19 to 9.1 per cent from 11.2 per cent in the preceding year.

The gross NPAs of PSU banks improved to 11.6 per cent during the year from 14.6 per cent in the last fiscal. In absolute terms, it reduced to Rs 7,39,541 crore against Rs 8,95,601 crore in 2017-18.

While bankers are monitoring the situation after the apex court ruling, the main concern is with regard to the exposure to Vodafone Idea.

It is estimated that lenders that include the State Bank of India, IndusInd Bank, Punjab National Bank, Bank of Baroda and ICICI Bank have an exposure of around Rs 17,000 crore to Vodafone Idea.

Analysts at Jefferies had earlier said in a report that even if the telecom companies were in a position to make the payments, it will put stress on their already leveraged balance sheets.

“For Vodafone Idea, the payment itself will use up all existing and operating cash flows ex interest over the next three years. Even with a moratorium on spectrum dues, it will not have funding for capex. Bharti is better positioned, but full payment will require it to curtail capex,” the brokerage had warned.

It had pointed out that the ruling was a major negative for Vodafone Idea and raised concerns on its balance sheet. However, the implications for Bharti Airtel were mixed as a weaker Vodafone Idea was positive for the company in the medium term.

Ratings agency Fitch had earlier said the apex court judgment was credit-negative for the industry. “It is uncertain if the government would allow the payment of dues in instalments over five or 10 years after the court’s ruling on the review petition,” it had said.