Kotak BG not renewed due to its own regulatory constraint, Vi

Vodafone Idea (Vi) is failing to renew several lapsed bank guarantees (BGs), as this requires 100% cash margin to be provided to the banks.

The telco has sought more time from the Controller General of Communication Accounts, DoT. Vi has also expressed its inability to renew additional bank guarantees issued by Kotak Mahindra Bank. The exposure of Kotak Mahindra Bank to Vi currently stands within Rs 10 crore.

Vi’s spokesperson has denied this allegation to ET’s queries. It maintains that it has renewed BGs worth over Rs 4,000 crore in the current financial year, and all BGs are being renewed as and when required. Kotak is unable to renew the BGs due to its own regulatory constraint, and this is not related to the telco’s credit standing.

The situation reflects the banking sector’s aversion to lending to Vi, even for small BG sums. The telecom company has requested DoT to retain cash received from encashed BGs until replacement instruments are provided, citing a specific clause in the license agreement that allows this.

The financial challenges faced by Vi reflect the broader industry landscape as telecom carriers look to build agile and resilient networks, including the advent of 5G and enterprise adoption. Telecom Talk