Bad loans: Bankers meet on 12 large defaulters begins today; PMO to review progress separatelyThe 12 defaulters accounting for 25 per cent of total bad debt include Essar Steel, Bhusan Power and Steel, Alok Industries, Amtek Auto, Monnet Ispat, Lanco Infra, Electrosteel Steels, Era Infra, Jaypee Infratech, ABG Shipyard, and Jyoti Structures
A crucial meet of bankers to thrash out the future course of action following the 12 large loan defaulters identified by the Reserve Bank of India for insolvency proceedings has begun today. Bank officials are meeting from Monday to finalise their next course of action on six of the 12 bad loan accounts for immediate referral to NCLT after the RBI named the largest defaulters to face bankruptcy proceedings.
According to RBI, these 12 accounts owe Rs 2.5 lakh crore to the system, which constitutes around 25 per cent of gross bad loans.
The Reserve Bank of India, while announcing that it had identified 12 large borrowers who will face bankruptcy action, had refrained from naming the defaulters. However, media reports had subsequently revealed the names of these top defaulters on the RBI’s hit-list.
The first set of six troubled accounts are Bhushan Steel (Rs 44,478 crore), Essar Steel (Rs 37,284 crore), Bhusan Power and Steel (Rs 37,248 crore), Alok Industries (Rs 22,075 crore), Amtek Auto (Rs 14,074 crore) and Monnet Ispat (Rs 12,115 crore), a PTI report today quoted a banker as saying.
The other accounts named for bankruptcy action, according to bankers, include Lanco Infra (Rs 44,364.6 crore), Electrosteel Steels (Rs 10,273.6 crore), Era Infra (Rs 10,065.4 crore) Jaypee Infratech (Rs 9,635 crore) ABG Shipyard (Rs 6,953 crore) and Jyoti Structures with a defaulted loan of Rs 5,165 crore, PTI reported.
Last week, the RBI's internal advisory committee (IAC) had sent the list of 12 accounts to bankers for immediate reference under the Insolvency and Bankruptcy Code (IBC). These 12 accounts are led by SBI (six of them), PNB, ICICI Bank, Union Bank, IDBI Bank and Corporation Bank, according to bankers.
"Beginning Monday, banks are meeting to discuss six of the 12 accounts named by the RBI before referring accounts to the National Company Law Tribunal (NCLT) by the end of this month," a banker told PTI.
Since these are large accounts and involve multiple banks, the lenders will try to take a common view on all administrative requirements before referring these accounts to the NCLT. Another banker said, "they will also decide on the appointment of insolvency professional (IP) who will later decide on the resolution plan and submit it to the lenders for their consideration".
While ABG Shipyard, Amtek Auto, Alok Industries, Bhushan Steel, Bhushan Power and Steel, Electrosteel Steels, Jaypee Infratech, Jyoti Structures and Monnet Ispat and Energy did not respond to e-mails sent to them, Era Infra and Lanco Infra could not be contacted, PTI reported.
When reached out for comment, Essar Steel spokesperson said, "We are not aware of any such development."
These 12 accounts referred by the RBI have an exposure of more than Rs 5,000 crore each, with 60 per cent or more classified as bad loans by banks as of March 2016. Once a case is referred to the NCLT, there is a time line of 180 days to decide on a resolution plan. An additional 90 days can also be given. If a plan is not decided, then the company will go into liquidation.
Meanwhile, a separate meeting of senior officials of the ministries of finance and corporate affairs called by the Prime Minister's Office today will review the progress in the resolution of NPAs in the light of recent action taken by the Reserve Bank of India on stressed assets.
Prime Minister’s additional secretary P. K. Mishra is scheduled to take stock of the resolution of non-performing assets (NPAs) or bad loans which have reached unacceptably high level, sources said. The banking sector is saddled with NPAs of over Rs 8 trillion, of which Rs 6 trillion is on the books of public sector banks (PSBs).
The meeting is also likely to be attended by RBI deputy governor Viral Acharya, sources said. RBI is likely to spell out detailed measures to rein in NPAs and share a possible timeline to bring them down to the acceptable level.
Total NPAs of the banking system stand at over Rs 8 trillion of which Rs 6 trillion are with public sector banks. Last month, the government had cleared an ordinance to amend the Banking Regulation Act, giving the RBI more powers to direct banks to resolve bad loans.