After RBI identifies 12 large accounts for NCLT, bankers divided over selection criteria of investors

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Published: October 24, 2017 6:24:43 AM

11 of the 12 accounts have been admitted by the bankruptcy court and a few of them have received interest from potential investors.

NCLT, bankers, National Company Law Tribunal, Bankruptcy Code, IBC, Indian Banks' Association, Bhushan Power and Steel, Bhushan Steel, Punjab National Bank, State Bank of IndiaIn June, the central bank had identified 12 large accounts which banks referred to the NCLT.

Lenders are divided on the criteria to select new investors for companies which have been admitted to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC), senior bankers said, adding that talks held by the Indian Banks’ Association (IBA) have been inconclusive so far. According to bankers, while private sector banks prefer a discretion to choose an investor, public sector banks are keen to follow a pre-determined checklist. “Private banks do not want to rely entirely on the checklist because they believe the consortium should have the final say even after a company satisfies all requirements,” a banker said. The banker added that the checklist will assign weightage to the investors background, financial performance, past acquisitions and domain knowledge among others. Public sector bankers have said at IBA meetings that nothing should be left to the discretion of the consortium and whichever investor scores the most should be selected.

“Discretion could lead to probe by investigative agencies if the company fails to recover even after the investment,” a banker said. In June, the central bank had identified 12 large accounts (with exposure of more than Rs 5,000 crore and more than 60% of which is recognised as NPA) which banks referred to the NCLT. Once companies are referred to NCLT, the lenders in each of these accounts have to set up a committee to come up with resolution plan. If that cannot be done in a period of 180 days — this can be extended to 270 days — the borrowing entity will go into liquidation.

Meanwhile, 11 of the 12 accounts have been admitted by the bankruptcy court and a few of them have received interest from potential investors.
For instance, FE had reported that about half a dozen companies and financial institutions are interested to acquire a stake in the loss-making and highly indebted Bhushan Power and Steel, citing people familiar with the development. These include local steel producers Tata Steel and JSW Steel.
Meanwhile, a couple of foreign steel producers have shown interest in picking up a stake in Bhushan Steel. One of the foreign players is believed to be Korean steel giant Posco which has been trying to set up a plant in Orissa for several years now.

The two companies together owe banks close to Rs 95,000 crore. Insolvency proceedings were initiated against them in the NCLT (National Company Law Tribunal) on July 26 on the basis of pleas filed by State Bank of India and Punjab National Bank.

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