MTNL’s 40% Debt Repayment Offer Rejected by PSU Banks – A Navratna in Financial Crisis

MTNL, a state-owned telecom company, is facing financial difficulties as several banks declared its loans as non-performing assets (NPA) in August. In response, the company offered to settle its debt by paying back 40% of its dues, but this proposal was rejected by the banks, who found the 60% reduction in repayment too high.

Missed Payments and Growing Debt

MTNL has been struggling to meet its financial obligations, falling behind on payments to major banks like Union Bank of India, Bank of India, Punjab National Bank, and others. The company missed payments of ₹518 crore in principal and interest, with an overall outstanding debt of ₹7,925 crore. Its total financial liabilities have now reached ₹31,996 crore.

Banks Reject Settlement Proposal

After noticing signs of financial distress, MTNL suggested a one-time settlement, offering to repay only 40% of its borrowings. However, the banks refused and demanded full repayment. In a rare move, Union Bank of India froze MTNL’s accounts last month, marking an unusual step between two government-owned entities.

Government Bonds and Loan Guarantees

While MTNL’s bonds worth ₹27,739 crore are guaranteed by the government, the loans taken by the company do not have this guarantee. Bank of India, which also classified MTNL’s loans as NPA, manages an escrow account to receive government funds to service the bonds.

MTNL Struggles in a Competitive Market

MTNL, once a leader in landline services in Delhi and Mumbai, has been losing customers as 4G services gained popularity. Its network has become outdated, and the company’s debt and consistent losses over the past 12 years have left it unable to invest in modernisation or expansion.

Government Plans for MTNL and BSNL

To revive both MTNL and Bharat Sanchar Nigam Limited (BSNL), the government plans to launch 4G services, expand the telecom network, and ease the financial strain on their balance sheets. BSNL, which is managing MTNL’s operations, will launch 4G services for MTNL in Delhi and Mumbai.

Financial Losses and Future Plans

MTNL reported a consolidated loss of ₹3,269 crore for FY24, with ₹789 crore in revenue and ₹2,689 crore in finance costs. To reduce its debt and fund capital expenditure, the government has approved a plan for MTNL to monetise its surplus land and building assets. However, the process has been slow, according to bankers.