12 large NPAs to go under the hammer

The Reserve Bank of India (RBI) logo.

The Reserve Bank of India (RBI) logo.  

Bad loans of 12 large borrowers of commercial banks will go under the purview of Insolvency and Bankruptcy Code (IBC), the Reserve Bank of India (RBI) said on Tuesday. All these accounts have bank loans of over Rs 5,000 crore each and 60% of the borrowers have identified these accounts as non-performing. These accounts constitute 25% of the total system non-performing assets.

The central bank had formed an Internal Advisory Committee (IAC) - which held its first meeting on Tuesday - took the decision after a detailed review of the stressed asset situation.

“The IAC, in the meeting, agreed to focus on large stressed accounts at this stage and accordingly took up for consideration the accounts which were classified partly or wholly as non-performing from amongst the top 500 exposures in the banking system,” RBI said in a late evening statement.

“The IAC noted that under the recommended criterion, 12 accounts totaling about 25 per cent of the current gross NPAs of the banking system would qualify for immediate reference under IBC,” the statement said. The central bank, however, refrained from disclosing these borrowers.

“This is the right way to go to. Things have started moving. A number of cases are filed by us also,” said the chief executive of a large bank.

Banks will get six months time for all the other stressed accounts, which are not referred to IBC, to finalize a viable resolution plan, failing which banks will be required to file for insolvency proceedings under the IBC.

“Why six months, we will send it right now. What is the point in waiting for six months if we don’t get certain relaxation in resolving those,” the banker added.

RBI has said the details of the resolution framework in regard to the other non-performing accounts will be released in the coming days.

The move comes after the government amended the Banking Regulation Act which gave more powers to RBI to resolve stress in the banking system.

“The Reserve Bank, based on the recommendations of the IAC, will accordingly be issuing directions to banks to file for insolvency proceedings under the IBC in respect of the identified accounts. Such cases will be accorded priority by the National Company Law Tribunal (NCLT),” RBI said.

Bad loans in the banking system zoomed in the last few years which went up from 4.6% in March 2015 to 9.1% in September 2016. The government and the banking regulator have been taking several steps to resolve the stressed asset problem. (End)

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Printable version | Sep 30, 2020 3:35:29 PM |

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