Wor­ried Finmin Seeks De­tails of 40 A/Cs Tagged for In­sol­vency

Min­istry wants to know im­pact of RBI move on pro­vi­sion­ing & cap­i­tal needs of state-run banks

The Economic Times - - Front Page - Dheeraj.Ti­wari@ times­group.com

New Delhi: The fi­nance min­istry has ur­gently sought de­tails of around 40 ac­counts that have been iden­ti­fied by the Re­serve Bank of In­dia for in­sol­vency pro­ceed­ings from state-run lenders. The min­istry wants to as­cer­tain the im­pact on pro­vi­sion­ing and cap­i­tal needs of al­ready strug­gling state-run banks.

The lenders will need to file bank­ruptcy cases in re­spect of th­ese ac­counts if they are un­able to find any other way to re­vive the cred­i­tors by end De­cem­ber. Ac­cord­ing to in­dus­try es­ti­mates, th­ese may add up to loans worth .₹ 1 lakh crore.

Be­sides ex­ist­ing large ac­counts like Video­con, IVRCL, Lanco In­frat­ech and Jaiprakash As­so­ciates, some of the other names are Transstroy In­dia and Ideal En­ergy Projects.

A se­nior fi­nance min­istry of­fi­cial con­firmed the de­vel­op­ment and said one of the aims is to take stock of pro­vi­sion­ing re­quire­ments that may be re­quired. “The banks had ex­pressed con­cerns over the ex­tra pro­vi­sion­ing re­quire­ments and that is also be­ing looked at,” the of­fi­cial said, adding that if re­quired dis­cus­sions may be held with RBI. In June, some banks had raised this is­sue with the gov­ern­ment. State Bank of In­dia, the coun­try’s big­gest, had writ­ten to the fi­nance min­istry rais­ing con­cerns over the strin­gent pro­vi­sion­ing norms for com­pa­nies un­der the In­sol­vency and Bank­ruptcy Code (IBC).

In a note ear­lier this week, Fitch Rat­ings said the weak cap­i­tal po­si­tion and stock of non-per­form­ing loans have im­pacted state-run banks’ “abil­ity to pur­sue mean­ing­ful growth”, peg­ging the cap­i­tal needs of lenders at $65 bil­lion by 2019. IN­AD­E­QUATE CAP­I­TAL AND NPAs HAVE IM­PACTED BANKS’ ABIL­ITY TO LEND

More ac­counts be­ing taken up for in­sol­vency pro­ceed­ings will fur­ther erode the fi­nances of banks. RBI told banks in a June 15 cir­cu­lar that for ac­counts iden­ti­fied for res­o­lu­tion un­der IBC, lenders will need to make a min­i­mum pro­vi­sion of 50% for the se­cured por­tion of the out­stand­ing amount, plus an ad­di­tional 100% on the un­se­cured por­tion.

In May, RBI had iden­ti­fied 12 stressed ac­counts, each hav­ing over ₹ 5,000 crore of out­stand­ing loans and ac­count­ing for 25% of to­tal NPAs of banks for im­me­di­ate re­fer­ral for res­o­lu­tion un­der the bank­ruptcy law. Bank unions on Thurs­day had ex­pressed con­cern over the bank­ruptcy process by var­i­ous banks for the res­o­lu­tion of bad loans and said the process is not yield­ing the de­sired re­sults.

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