MUMBAI: Banks led by State Bank of India (SBI) are said to have served an ultimatum on Essar Steel to start repaying the money it owes or be prepared for a forced change in management. This was conveyed at a meeting between bank officials and the management of Essar Steel on Wednesday at SBI headquarters in Mumbai, said two senior officials who did not want to be named.The 30-bank joint lenders’ forum (JLF) has an exposure of Rs 40,000 crore to Essar Steel, of which close to Rs 15,000 crore has been refinanced, allowing the unlisted Ruia-run company to repay the amount in 25 years under the 5:25 scheme. This refers to banks extending longterm loans to infrastructure projects for 25 years and refinancing them every five years.The Essar Group unit had asked for a recast of the rest of the loans at the meeting, it said in an email to ET. It had “sought a restructuring of its debt under JLF, which was also discussed along with other options, including continuation of company’s efforts to bring in strategic investor/partner,” Essar Steel said.“The promoters of the company reiterated their commitment to infuse additional funds into the company to support the company’s operations and improve the capital structure, while reiterating no need for further funding by banks.”The move comes as banks are pushing hard to get back the money they loaned to Vijay Mallya-promoted Kingfisher Airlines Banks are being forced to take stern action against truant borrowers following instructions by the Reserve Bank of India to clean up their books by March 2017 by making proactive provisions against stressed accounts. As a result, banks declared poor earnings in the third quarter of FY16.As part of corporate debt restructuring, banks are prepared to take a haircut and extend repayment periods on loans. Failing that, they can move to strategic debt restructuring, involving forcible takeovers. Essar Steel has missed payments, prompting Bank of India and Bank of Baroda to classify its loans as non-performing assets (NPAs). More banks are expected to do so in the quarter ending March.“We have told them to pay their dues and make the account standard or banks would have no choice but to withdraw financial support and change management,” said one of those cited above. Any default by Essar Steel will hurt banks as they would have to set aside 15% of the outstanding loans as provisions.SBI has the largest exposure of Rs 5,400 crore, followed by IDBI Bank at Rs 3,500 crore, ICICI Bank at Rs 2,600 crore and Canara Bank at Rs 2,300 crore. Like its peers, Essar Steel has been hit by falling prices and oversupply by Chinese companies. “However banks are not in a mood to give any more concessions,” said the banker cited above. "We have asked the company to infuse at least close to Rs 3,000 crore in a few weeks or be prepared to face action.Essar Steel said it informed the lenders of a significant improvement in all-round performance due to the fall in gas prices, cost-reduction initiatives, rebound in prices following the setting of a floor for import prices and other measures by the government