India’s IBC strike: After the banks successfully recovered Rs 36,400 crore following the successful resolution of Bhushan Steel, the finance ministry expects banks to write back more than Rs 1 lakh crore after the resolution of all 12 NPA cases referred to insolvency proceedings by the RBI it its first list. Notably, Bhushan Steel was the largest account among RBI’s 12 big accounts identified for an immediate resolution.
These 12 accounts, constituting 25% of country’s total bad loans, were subsequently admitted by insolvency court National Company Law Tribunal (NCLT). Last week, a Tata Group company acquired controlling stake of 72.65 per cent in the debt-ridden Bhushan Steel Ltd for around Rs 36,000 crore. The move is seen to help in cleansing the banking system as well as boost lenders profitability.
The remaining 11 NPA cases which are in the pipeline will easily bring to the table over Rs 1 lakh crore and the amount coming from resolution under the Insolvency and Bankruptcy Code (IBC) will directly add to the bottomline and help in reduction of NPAs of the public sector banks, PTI reported a finance ministry official as saying.
Following the RBI’s advisory last year, banks referred Bhushan Steel Ltd, Bhushan Power & Steel Ltd, Essar Steel Ltd, Jaypee Infratech Ltd, Lanco Infratech Ltd, Monnet Ispat & Energy Ltd, Jyoti Structures Ltd, Electrosteel Steels Ltd, Amtek Auto Ltd, Era Infra Engineering Ltd, Alok Industries Ltd and ABG Shipyard Ltd to NCLT. These accounts together have total outstanding loan of Rs 1.75 lakh crore.
Describing the development of Bamnipal Steel taking over Bhushan Steel as a “historic breakthrough” in resolving bad loans of banks, interim Finance Minister Piyush Goyal said that this is a record step towards resolving the legacy of unprecedented amount of bad bank loans inherited by this Government.
“Congrats to PM @narendramodi ji & @arunjaitley ji for a historic breakthrough in resolving legacy issues of Banks. Lenders recovered almost entire principal loan of Bhushan Steel through Rs 36,400 cr transparent bid by Tata Steel and also got 12% stake in the company,” he tweeted. The other cases under the IBC also seem to be picking up pace The Kolkata Bench of the National Company Law Tribunal (NCLT) has already approved Vedanta Resources resolution plan for acquisition of Electrosteel Steels last month.
The NCLT last month also asked the lenders of Bhushan Power & Steel to consider the bid submitted by UK-based Liberty House for the debt-ridden company. Bhushan Power and Steel owes close to Rs 48,000 crore to banks and was referred to the NCLT by Punjab National Bank in June last year.