Banks set to crack down on defaulters in RBI’S 2nd list
Firms, including Monnet Power & Visa Steel, to be referred to NCLT
MUMBAI: Banks are set to refer a majority of the 28 loan defaulters cited in the Reserve Bank of India’s (RBI’S) second list to bankruptcy courts starting Thursday, as the central bank prods lenders to speedily resolve bad loans clogging their balance sheets.
After its first list of 12 large defaulters was sent to banks in June, RBI sent a second list of 28 troubled companies in late August, accounting for ₹2 lakh crore of bad loans, asking lenders to find resolution plans for them by December 13 or start insolvency proceedings by December end.
The assets of some of these 40 top defaulters are likely to be sold over the next few months as RBI and the Centre pushes lenders to speed up the resolution of ₹10 lakh crore of soured loans. This, along with the government’s ₹2.1 lakh-crore capital injection in state-run banks, is expected to give lenders the resources to restart lending and boost economic growth.
Of the 28 names in the second list, at least five have already been taken to the National Company Law Tribunal (NCLT). That leaves banks with 23, some of which will now head for the bankruptcy court.
“A majority of cases will be referred to NCLT. We are awaiting rating of a few accounts which is expected in the next 2-3 days. Then we will decide on whether to refer the company for insolvency proceedings,” said a senior banker with a large state-owned bank.
RBI has mandated that for a resolution outside NCLT, the portion of debt designated as sustainable must be rated by at least two external rating agencies as investment grade.
To be sure, banks have not finalised the list of accounts from the second list that will be taken to NCLT because lenders are expecting a resolution for Videocon Industries Ltd and Jaiprakash Associates Ltd, companies with large exposures, three senior bankers said, requesting anonymity.
Accounts where banks have decided to move NCLT, the adju- dicating authority for proceedings under the Insolvency and Bankruptcy Code, include Essar Projects, Monnet Power Co, Visa Steel Ltd, Jai Balaji Industries Ltd, Uttam Galva Steels Ltd, Uttam Galva Metallics and Coastal Projects Ltd, among others.
“Aggregate sector level provisioning for the second list accounts is around 42-43% as compared to the 50% by March 2018 mandated by RBI for accounts under NCLT,” said Karthik Srinivasan, group head of financial sector ratings at Icra Ltd. “So, the insolvency reference may not significantly increase the provisioning burden on banks.”
In the case of Videocon Industries, consortium leader State Bank of India (SBI) is awaiting a rating before finalising a resolution plan. The company’s stan- dalone debt stood at around ₹19,506 crore at the end of March 31, 2017.
“It is a policy of the bank not to comment on individual accounts and its treatment,” an SBI spokesperson said in an email reply.
Email and calls to Venugopal Dhoot, chairman and managing director of Videocon, remained unanswered.
For Jaiprakash Associates, lead banker ICICI Bank has been in talks with promoters to sell assets and repay debt. The plan involves deep restructuring of the account. Standalone debt of the company stood at ₹25,587 crore as at the end of March.
An ICICI Bank spokesperson declined to comment. Calls and messages to Jaypee Group chairman Manoj Gaur were not answered.
Separately, bankers are yet to decide on the one-time settlement proposal of Anrak Aluminium, and resolution plan for BILT Graphic Paper Products, which entails sale of loans to asset reconstruction companies.
A recent Business Standard report suggested that the banks have approached the central bank for extension of the December 13 deadline. RBI is unlikely to accept their request, a central bank official said, requesting anonymity. Others like Orchid Pharma, Ruchi Soya, Castex Technologies, IVRCL and SEL Manufacturing have been referred for insolvency proceedings. Restructuring plan has been approved for Soma Enterprises Ltd and Jayaswal Neco Industries Ltd. In case of Jayaswal Neco, banks are awaiting rating on the sustainable portion of debt.
THE RESERVE BANK OF INDIA’S SECOND LIST OF 28 TROUBLED COMPANIES ACCOUNT FOR ₹2 LAKH CRORE OF BAD LOANS,