The recent restructuring of the debt of distressed companies has had an incidental benefit for banks and financial institutions, thanks to the bull run in the markets.

Apart from putting sticky assets on the recovery path, the lenders -- particularly the ICICI Bank, the Industrial Development Bank of India and the State Bank of India -- are raking it in by selling the shares of these companies in the market.

As part of the debt restructuring, in most of the cases a portion of debt exposure of the lenders has been converted into equity.

"There was no lock-in clause when the debt was converted into equity. The lenders are free to hawk them in the market and book capital gain. This is particularly significant when the income from debt trading has come down with the bottoming out of interest rates," said an industry source.

A senior ICICI Bank executive said the bank is indeed making money by selling its equity holdings in various companies in the market.

"We made money in the first quarter of the current fiscal too. The treasury is selling equities to take advantage of the bull run in the market," the executive said.

As on June 30, the market value of ICICI Bank's equity portfolio was Rs 1,700 crore (Rs 17 billion). Since then the value has risen with the Sensex crossing the 4000 mark.

This, however, does not include the bank's investment in group companies. IDBI has an equity portfolio of over Rs 2,000 crore (Rs 20 billion).

The State Bank of India's equity portfolio is comparatively smaller. The bulge of equity holdings has gone up recently following the conversion of debt into equity which formed a crucial part of the debt restructuring packages.

Banks and financial institutions have so far recast sticky assets worth over Rs 42,000 crore (Rs 420 billion) through the corporate debt-restructuring platform ever since its inception last year.

Up to June 30 this year, the CDR cleared loans worth Rs 37,460 crore (Rs 374.60 billion) involving 40 sticky assets.

Another 13 cases involving Rs 8,500 crore (Rs 85 billion) are in the pipeline. Conversion of part of debt into equity is a crucial part of most of the recast package.

Outside the CDR too, banks and institutions on their own have been recasting sticky debt. The trend was set by ICICI Bank with the recast of Arvind Mills debt.

"With the equity market now booming, banks and institutions are selling their holdings in steel, chemicals and textiles companies. This will add to their bottomline substantially," said a banking analyst.

Industry sources have described the situation as a win-win game for both the borrowers as well as the lenders. "As a fall out of the debt recast, companies like Arvind Mills and Essar Steel are thriving on the market. There is nothing wrong if the lenders take advantage of the situation and make a killing," they said.