Banks may have to take 60% haircut on 12 largest NPAs: Crisil

The strong steps taken by Reserve Bank to resolve NPAs are likely to raise provisioning by a whopping 25 per cent this year as lenders will take up to 60 percent hair cut while resolving these accounts. "Based on our assessment of the embedded value in the top 50 NPA cases, we estimate a 60 per cent haircut would be needed on these loan assets. That would mean banks will have to increase provisioning by another 25 per cent this fiscal, compared with nine per cent in the last fiscal," Crisil senior director Krishnan Sitaraman said, reports PTI. The RBI over a fortnight back referred the 12 largest bad loans for resolution under the Insolvency and Bankruptcy Code 2016 (IBC), which provides for these companies to be referred for liquidation. The apex bank took the decision based on the recommendations of its internal advisory committee (IAC) that also mandated a timebound resolution of these cases. The largest 12 accounts the RBI named are Bhushan Steel (Rs 44,478 crore), Lanco Infra (Rs 44,365 crore), Essar Steel (Rs 37,284 crore), Bhushan Power (Rs 37248 crore), Alok Industries (Rs 22,075 crore), Amtek Auto (Rs 14,075 crore), Monnet Ispat (Rs 12,115 crore) Electrosteel Steels (Rs 10,274 crore), Era Infra (Rs 10,065 crore) Jypaee Infratech (Rs 9,635 crore), ABG Shipyard (Rs 6,953 crore) and Jyoti Structures (Rs 5,165 crore).

Of these, six have already been referred to the National Company Law Tribunal (NCLT).

The SBI, which is the lead banker to six of these 12 accounts, has already referred Bhushan Steel, Essar Steel and Electrosteel Steels to the NCLT, while PNB has sent Bhushan Power to the same body last week. Besides, the IDBI Bank referred Lanco Infratech, which is in default of Rs 44,364.6 crore to a clutch of lenders, to the NCLT for possible liquidation.

The state-run Corporation Bank also last week sent the Delhi-based auto ancillary maker Amtek Auto, which is in default of Rs 14,075 crore, to the NCLT.