Steel companies are now leaving no stones unturned to get funds at liberal terms in order to complete their projects. Perturbed by the tough stand adopted by the institutions, some steel companies have taken up the matter with the steel and finance ministries. Financial institutions, which met in the last week of September, had asked promoters of steel companies to bring in 20 per cent of the additional funding required.

``None of the companies or promoters are in a position to bring in funds at this juncture. There is no way I can raise such money when the capital market is facing turbulent times,'' said a senior official of a steel company, ``if I need another Rs 300 crore tocomplete my project, I have to bring in Rs 60 crore myself.''

Barring Tata Steel, almost all the companies in the steel industry have queued up before the institutions for funds. Seeing the steel companies demand, now textile companies have also jumped into the fray asking for fresh loans at liberal terms for reviving the sick projects.

FIs, apparently under pressure from the companies and ministries, are set to okay reschedulement of past loans and fresh advances to some companies when they meet again this month.

Institutions -- mainly IDBI, ICICI and IFCI -- are in a predicament. ``The capability of some steel companies to repay loans is doubtful. It's a catch-22 situation. If we don't do anything now, some of the loans we have extended may end up as non-performing assets (NPAs). This is at a time when steel companies are performing badly due to demand recession and lower customs duty. There is another issue whether we should reward for their omissions and commissions,'' said a source in a financialinstitution.

Other factors which have put steel companies in a dilemma are the threat by institutions to recall loans and change in management of companies which are not in a position to meet stiff conditions. Institutional sources, however, ruled out extending any assistance to a couple of companies which have mismanaged the affairs.

One steel company based in Madhya Pradesh siphoned off funds by inflating the project cost. The promoters of this company spirited away money by overinvoicing the import of plant and machinery.

What is disturbing the officials is that the exposure of institutions to some of these steel companies is already huge. The exposure of one of the leading institutions to a steel group works out to nearly 17 per cent of the former's net worth.

The rising level of NPAs -- or defaulted loans -- is already creating problems for institutions.

According to a study by a foreign investment bank, 200 companies operating in India have a potential to default on Rs 10,800 crore of bankloans and Rs 27,300 crore of loans from financial institutions. The total liability of private sector steel companies with FIs is estimated at around Rs 20,000 crore. Shares of FIs have also crashed on stock exchanges.