The 2G spectrum controversy and rising investigation into loans given out to the telecom companies has weakened the confidence of banks in this regard.
The largest lender of the country, State Bank of India has become more strict in its lending to the telcos. The bank has decided that it will only be offering project based loans to these firms, which would increase the firms' cost of borrowings.
SBI will "be extra careful now to lend to the (telecom) sector, especially to those firms" which have received license only in 2008, said Hemant Contractor, deputy managing director and chief financial officer of SBI.
"We will take a closer look at each proposal and their compliance with the norms, service rollout plans, and will assess their repayment capacity," said Contractor. He is also in the list of candidates to succeed Chairman O P Bhatt.
"Banks will be cautious to lend to newer players as many of them are making losses and have a weak topline. Their margins are less as compared to larger players. Growth is also less visible as compared with the larger players," said Archit Singhal, a research analyst with Jaypee Capital Services Ltd.
SBI has offered loans to companies like Uninor, Videocon and Loop Telecom. The total exposure of the lender in these companies amounts to Rs 5000 crore of the total guarantees of the bank and Rs 9000 crore in the form of corporate loans, working capital and term loans. SBI however says that all these loans are fully secured ones.
"These loans are fully secured. There are no issues unless the licences are cancelled. In that case, we will be taking up the issue with the government and the individual borrowers," Contractor said.