NPA problem: RBI identifies 12 mega defaulters for insolvency
The Reserve Bank of India (RBI) said on Tuesday that its Internal Advisory Committee (IAC) has identified 12 accounts covering approximately 25 percent of the non-productive assets of the banking system for immediate resolution under the Code of Insolvency bankruptcy.
The gross bad debt of India’s banking system in March was Rs 7.11 Rs, which means that 12 accounts would be responsible for around Rs 1.78 lakh rupees.
The central bank did not name the borrowers.
The government amended the RBI Act, empowering the central bank to encourage banks to take punitive measures against individual accounts under the Code. Earlier, the central bank could provide guidance on the scale of the industry.
Appointing a professional process to support the management of a company and then come away with a solution to repay the loans take a long time and may not be a workable solution, corporate lawyers say.
The process begins with the fact that banks approach the National Business Law Court (NCLT) to appoint a professional to run a business, even if the existing board is suspended. Professional gets 180 days to find a viable solution for the company in order to repay their loans. This period can be extended by 90 days. If the company can not find a solution within 270 days, a liquidator was appointed.
Banks and workers will have to submit their application to the liquidator. “The difference between the new code and the Council for Industrial and Financial Reconstruction is that the former has strict deadlines. Meanwhile, a developer can move the Supreme Court for various reasons, delaying the process,” said RS Loona, associate director , Corporate Alliance Attorneys.
Another lawyer said that it would be difficult to understand the operations and activities of a company in 270 days and therefore may not be a viable solution for banks.
Bankers said the banking sector had prepared records of 70 such cases that were adapted to be considered insolvent profile. “Once the RBI proposes a structure, the industry will send these cases, according to the team,” said a banking industry source.
However, a major banker also said that there was very little new in the state of RBI against the expectations of the bankers.
“Banks were ready to give the big NPA long case to NCLT. In fact, lenders have lost months of valuable time,” said the banker, adding that now that work has been started, bankruptcy procedures must remain In progress to complete the process within 180 days.
According to bankers, getting professionals with bankruptcy expertise and qualified to handle great pitfalls is a challenge.
On the other hand, since this is a big asset sale, it would be important to find the bidders with lots of money. An exercise in this scale occurs for the first time in India.
According to the RBI, the IAC has explored 500 maximum exposures of the banking system and recommended for bankruptcy “all accounts with an amount excluding capital fund and unfounded of Rs 5,000 crore, with 60 percent or more classified Such as unprofitable banks on March 31, 2016. ”
But all 12 accounts were answered immediately under the Code.
The central bank said the stress comes from a few sectors such as energy, telecommunications, steel, textiles and aviation.
Union Finance Minister Arun Jaitley later said that the number of heavily stressed accounts would be 40 to 50 years.
But banks were unwilling to disclose their active weakness and necessary problem to stimulate the RBI to do. Recently it was learned that private banks could have concealed a large part of the delinquency even after considering the quality of the RBI’s assets.
“As for the other delinquent accounts that are not eligible under the above criteria, the IAC banks recommends to finalize a resolution plan within the six months. In cases where a viable resolution plan is agreed upon within six Months, banks should be required to file for insolvency proceedings under the IBC, “the RBI statement said.
The RBI said in the IAC’s recommendation, the central bank could begin issuing instructions to banks to file insolvency proceedings under the Code with respect to the identified accounts.