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Bad loan resolution: Banks drag Essar Steel, Bhushan Steel to NCLT

LiveMint logoLiveMint 22-06-2017 PTI

Mumbai: Lenders led by the State Bank of India (SBI) on Thursday decided to begin insolvency proceedings against Bhushan Steel, Essar Steel and Electrosteel Steels by referring them to the National Company Law Tribunal (NCLT) for recovery under the Insolvency and Bankruptcy Code. The decision was taken at a marathon meeting chaired by SBI.

While Bhushan Steel is in default of Rs44,478 crore to banks, Essar Steel owes Rs37,284 crore and Electrosteel Steels Rs10,273.6 crore. These three borrowers are among the 12 accounts identified by the Reserve Bank for immediate reference to NCLT. These 12 accounts alone constitute a quarter of the over Rs8 trillion of non-performing assets (NPAs).

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Bankers, led by IDBI Bank, will be meeting on Friday to decide on Bhushan Power & Steel which has been in default of Rs37,248 crore to the lenders. The development couldn’t be immediately confirmed with these companies. Besides these three accounts, the other stressed borrowers include Amtek Auto, which is in default of Rs14,074 crore, Alok Industries (Rs22,075 crore), Monnet Ispat (Rs12,115 crore) and Lanco Infra (Rs44,364.6 crore). Era Infra (Rs10,065.4 crore), Jypaee Infratech (Rs9,635 crore), ABG Shipyard (Rs6,953 crore) and Jyoti Structures (Rs5,165 crore) were also among the identified stressed accounts, according to reports.

“The meeting on these three companies was to finalise the application which banks will be filing to NCLT,” said a senior banker. Lenders want all the bankers in the consortium to give their consent before registering the case with NCLT. Officials from these three companies were also present at the meetings, bankers said.

On Saturday, Lanco Infratech said the Reserve Bank of India (RBI) has directed its lead banker IDBI Bank to initiate insolvency procedure for the company. Once a case is referred to NCLT, there is a 180-day time line to decide on a resolution plan though 90 days can be given in addition. If a plan is not decided, then the company will go into liquidation.

The internal advisory committee (IAC) of the RBI after its meeting on 13 June had recommended 12 accounts totalling about 25% of the gross NPAs of the banking system for immediate reference under Insolvency and Bankruptcy Code. These 12 accounts referred by the RBI have an exposure of more than Rs5,000 crore each, with 60% or more classified as bad loans by banks as of March 2016.

Banking system’s total NPAs stand at over Rs8 trillion of which Rs6 trillion are with public sector banks. Meanwhile, RBI on Thursday expanded the oversight committee by appointing three more members to the high-level panel that will vet the process to resolve mounting bad loans bogging down the banking sector. Former chief vigilance commissioner Pradeep Kumar will head the now five-member panel that will work through multiple benches, RBI said in a statement.

The expansion follows promulgation of the Banking Regulation (Amendment) Ordinance 2017 last month. The ordinance had outlined the reconstitution of the overseeing committee (OC) with an expanded mandate.

“The Reserve Bank has since brought the OC under its aegis. The OC will, for the present, have five members, including a chairman, and will work through multiple benches as may be necessary and constituted by the chairman to opine on the cases referred to it by the banks,” it said.

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