Banks, especially the state-run lenders which are burdened with the bulk of the bad loans in the Indian banking system, are stepping on the gas to recover their dues by taking their borrowers to the bankruptcy court. With 11 of the 12 large accounts identified by the Reserve Bank of India having been admitted by the National Company Law Tribunal (NCLT), bankers are now focusing on recovering their loans to smaller accounts by referring them to the NCLT.
Mumbai-based Bank of Baroda plans to take as many as 26 accounts to the NCLT in the current quarter. Bank of Baroda managing director & CEO PS Jayakumar said, “Our focus is on the accounts we control. On those, we need to be very aggressive in the use of NCLT.” “We have done a few transactions. One of them is admitted. The next three-four will get admitted soon. We have a large pipeline. In this quarter it will go up to 26. These are not large accounts — between Rs 100 and Rs 500 crore,” Jayakumar added.
Another state-run lender, Union Bank of India, plans to take 10 accounts amounting to Rs 1,400 crore to the NCLT for resolution. Punjab National Bank has exposure to 13 accounts amounting to Rs 350 crore that have been referred to the NCLT, the Delhi-based lender had told investors in a post-earnings call earlier this month. Bank of India has exposure to 36 accounts amounting to more than Rs 12,000 crore that have been referred to the NCLT, it recently said.
In June, the RBI’s Internal Advisory Committee (IAC) had said 12 accounts totalling about 25% of the Rs 8 lakh crore of non-performing assets of the Indian banking sector would qualify for immediate reference under the Insolvency and Bankruptcy Code (IBC). Of these, Rs 6 lakh crore are with the state-run banks.
Subsequently, Jyoti Structures, Essar Steel, Monnet Ispat and Energy, Alok Industries, Electrosteel Steels, Amtek Auto, Bhushan Steel, Bhushan Power and Steel, ABG Shipyard, Lanco Infratech and Jaypee Infratech have been admitted by the NCLT.
For accounts that do not qualify under the above criterion, the IAC had recommended that banks should finalise a resolution plan within six months. “In cases where a viable resolution is not agreed upon within six months, banks should be required to file for insolvency proceedings under the IBC,” the RBI had said.