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
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.