Punjab and Sind Bank Declares MTNL Accounts as Non-Performing Assets Amid Mounting Debt and Missed Payments

Punjab and Sind Bank Declares MTNL Accounts as Non-Performing Assets Amid Mounting Debt and Missed Payments

Punjab and Sind Bank (PSB) has officially classified the accounts of Mahanagar Telephone Nigam Limited (MTNL) as Non-Performing Assets (NPA) as of October 8, 2024, according to a regulatory filing in compliance with SEBI (Listing Obligations and Disclosure Requirements) Regulation 30, 2015. The telecom company, burdened by significant financial difficulties, has missed multiple payment deadlines, leading to this classification.

In a statement issued on October 16, 2024, MTNL acknowledged the notification from PSB regarding the change in the status of its accounts to NPA. This development marks another blow to the state-owned telecom company, which has been struggling with operational and financial challenges for years.

SBI Previously Classified MTNL Accounts as Sub-Standard NPA

This is not the first instance of MTNL’s financial troubles coming to light. Earlier, the State Bank of India (SBI) had classified MTNL's loan accounts as sub-standard NPAs due to non-payment of interest and instalments since June 30, 2024. According to a letter dated October 1, 2024, from SBI, MTNL’s outstanding loan amount was Rs 325.52 crore as of September 30. The bank stated that MTNL's term loan account had officially been moved to the NPA category on September 28 due to consistent defaults.

SBI has raised concerns over the lack of payments and sought updates on the government’s assurance to clear MTNL’s mounting dues. The bank also requested details of MTNL’s ongoing monetization initiatives, including a partnership with the National Buildings Construction Corporation (NBCC) to develop 13.88 acres of land into residential and commercial properties as part of its efforts to raise funds.

Mounting Financial Troubles and Potential Legal Action

The financial situation for MTNL continues to deteriorate, as the company faces mounting unpaid dues with multiple banks. Aside from SBI, other financial institutions such as Punjab National Bank and Union Bank have also taken action due to missed payments. In one significant move, Union Bank has frozen all of MTNL’s accounts.

MTNL’s total debt stands at Rs 31,944.51 crore, with borrowings from various banks and financial institutions amounting to Rs 7,873.52 crore. In response to these challenges, the company is seeking Rs 1,151.65 crore from the government to cover interest on sovereign guarantee bonds in the current fiscal year. The Indian government, in its Budget, allocated Rs 3,668.97 crore for the repayment of MTNL’s bond principal.

SBI has warned MTNL that it may be forced to take legal action if the company fails to make the required payments. In its communication, SBI indicated that it could initiate legal proceedings to recover the loan along with interest, and may enforce securities if necessary. This would add further pressure on MTNL, which is already facing challenges from multiple creditors.

Conclusion

MTNL’s ongoing financial struggles continue to escalate, with its accounts now classified as NPAs by several leading banks. The classification by Punjab and Sind Bank, following similar actions by SBI and other financial institutions, underscores the severity of MTNL’s debt crisis. With total borrowings exceeding Rs 31,944 crore and pressure mounting from various lenders, the future of the state-owned telecom company remains uncertain.