Banks using RBI’S 15day window as NPA grace period

RBI is likely to reject the move, say experts

Lenders are using a 15-day period after a Reserve Bank of India (RBI) deadline to finalize resolution plans for stressed companies ended on August 27 to obtain final approvals for 12 loan accounts that are close to being resolved outside bankruptcy courts, a move some experts say will be rejected by the banking regulator.

Lenders to the stressed firms have interpreted the 15-day window granted by RBI to refer unresolved stressed assets to the National Company Law Tribunal (NCLT) as a grace period, three people aware of the development said. In a February 12 circular, the central bank asked lenders to find resolution plans for stressed loan accounts of ₹2,000 crore and above within 180 days of March 1.

Going by the RBI circular, banks are supposed to start referring unresolved loans, no matter what stage of resolution they are at, to the NCLT within 15 days from the end of the 180-day period. According to one of the three people cited before, although most resolution plans have been approved by the consortium, a few documents need to be signed and that will happen in the next 15 days. “In some cases, even the investor or the buyer has to obtain certain approvals and therefore we hope to wrap it up in the next few days,” the person said, adding that in all viable cases, rating agencies have completed evaluation of the outstanding loans.

The second person said bank chiefs, at a meeting on Monday, had broadly agreed on the accounts to be sent to the bankruptcy court. “We have agreed that whatever last-mile approvals are required will be taken in the next 15 days,” the person said.

According to the February 12 circular, a resolution plan shall be implemented only if the borrower is no longer in default with any of the lenders. If the resolution involves restructuring, all related documentation, including execution of necessary agreements between lenders and borrower, creation of security charge are to be completed by all lenders. However, some believe the central bank might not relent and seek strict adherence to the circular. “The circular is quite clear in saying that if resolution is not complete within 180 days, the account will have to be referred to the NCLT,” said Siby Antony, executive chairman of Edelweiss Asset Reconstruction Co.