Vodafone Idea’s debt of Rs 1.80 lakh crore is a matter of grave concern for the banking industry as the cash-strapped telecom operator is struggling to stay afloat and seeks moratorium on regulatory dues.

The country’s largest lender State Bank of India, which has an exposure of Rs 11,000 crore to the troubled telecom major, is closely watching the developments and is prepared to take all necessary measures to insulate the balance sheet from any potential threat.

“We are engaging with all the stakeholders to arrive at a solution. We have to wait and watch,” said SBI chairman Dinesh Khara on Wednesday, adding that Vodafone Idea Ltd (VIL) was not a stressed account on the bank’s books yet.

Eight banks led by SBI have large exposure to VIL. While SBI’s exposure is the largest, it is less than 0.5% of the bank’s loan book. In terms of percentage to their loan books, IDFC First Bank, YES Bank and IndusInd Bank top the list.

“We have insulated our balance sheet from any unexpected shocks. The EBITDA margins are good. But the concern is about liability of the company that is outside the balance sheet, like the AGR (adjusted gross revenue) calculations. On the credit side there is absolutely no issue,” SBI managing director Ashwani Bhatia told Indianbankingnews.com.

A day before, Punjab National Bank (PNB) managing director and CEO SS Mallikarjuna Rao expressed his worry over the bank’s exposure to VIL. “Developments in the last few days are areas of concern for the banking industry. Even the SBI chairman has given a statement that banks probably will not be willing to fund telecom companies in the absence of clarity on these issues," he said.

PNB has an exposure of Rs 3,000 crore and Yes Bank Rs 4,000 crore, a source familiar with the development said. Rao did not reveal PNB’s exact exposure but said that “it is not very high to impact the balance sheet”. Around 50% of it is guarantees we have offered to the other banks, he added.

"PNB will be discussing with other banks the way forward following Aditya Birla Group chairman Kumar Mangalam Birla’s letter to the government offering to hand over the stake in Vodafone Idea Ltd (VIL), Rao said, adding that “there are no defaults so far”.

In a letter to Cabinet Secretary Rajiv Gauba on 7 June, Birla sought clarity on adjusted gross revenue (AGR), adequate moratorium on spectrum dues and floor pricing. If immediate and active government support was not coming, Vodafone-Idea’s operations, Birla wrote, would be at an "irretrievable point of collapse".

Birla said that, with a “sense of duty” towards 27 crore customers he was willing to hand over his Vi stake to a public sector unit (PSU), a government entity or a domestic financial entity if that could save the company.

While Birla owns more than 27% stake in VIL, Vodafone Plc holds over 44%.

"Happy to work with the government to urgently explore all possible solutions, without consideration of our private interest," he said.

Birla also said that the telecom company was yet to approach Chinese investors. He said that foreign investors wanted to see a clear government intent to have a three-player telecom market.

Birla’s letter came after the Supreme Court on 23 July rejected Bharti Airtel, Vodafone Idea and Tata Teleservices' plea seeking re-computation of the AGR–related dues.In 2020, the court had given 10 years to the telcos to pay Rs 93,520 crore of AGR-related dues to clear their outstanding amount to the government.

Marking the VIL account as stressed, IDFC First Bank has made provisions of 15% (Rs 487 crore) against its outstanding exposure of Rs 3,244 crore (funded and non-funded). "This provision translates to 24% of the funded exposure on this account. The said account is current and has no overdues as of June 30, 2021," the lender said in its Q1FY22 investor presentation. It referred to the account as "one large telecom account".

Vodafone Idea owes the government Rs 96,270 crore in spectrum payment dues. Total AGR dues as assessed by the department of telecom (DoT) is estimated at Rs 58,254 crore. VIL has, so far, paid Rs 7,854 crore and the company’s self-assessment of dues stand at Rs 21,533 crore. AGR dues are to be paid in 10 annual instalments starting FY22.

In the quarter ended 31 March 2021, VIL reported a net loss of Rs 6,985.1 crore while its cash balance was just Rs 350 crore.

Meanwhile, Birla on Wednesday stepped down as non-executive director and non-executive chairman of the VIL board. His position has been taken up by the firm’s current non-executive director Himanshu Kapania.

Recently, Vodafone Group chief executive Nick Read said that the British telco won’t infuse any additional equity in VIL.

Shares of VIL fell 18.51% on Wednesday to close at Rs 6.03 on BSE.