Bankers to decide next action on 6 of 12 big defaulters today
Bankers will meet on Monday to finalise their next course of action on six of the 12 bad loan accounts identified by the Reserve Bank of India for resolution under the bankruptcy laws. It is expected that lenders will have to take a minimum 25 per cent haircut.
"Beginning Monday, banks are meeting to discuss six of the 12 accounts named by the RBI before referring accounts to the National Company Law Tribunal (NCLT) by the end of this month," PTI quoted a banker as saying.
Last week, the Reserve Bank of India (RBI) internal advisory committee (IAC) had sent the list of 12 accounts to bankers for immediate reference under the Insolvency and Bankruptcy Code (IBC). Though the central bank has not identified the defaulters, the first set of six troubled accounts are believed to be Bhushan Steel (Rs 44,478 crore), Essar Steel (Rs 37,284 crore), Bhusan Power and Steel (Rs 37,248 crore), Alok Industries (Rs 22,075 crore), Amtek Auto (Rs 14,074 crore) and Monnet Ispat (Rs 12,115 crore), a banker said.
The other accounts named for bankruptcy action, according to bankers, include Lanco Infra (Rs 44,364.6 crore), Electrosteel Steels (Rs 10,273.6 crore), Era Infra (Rs 10,065.4 crore) Jypaee Infratech (Rs 9,635 crore) ABG Shipyard (Rs 6,953 crore) and Jyoti Structures with a defaulted loan of Rs 5,165 crore.
Meanwhile, bankers and analysts said PSBs will have to take a minimum haircut of 25 per cent on the RBI identified accounts under the Insolvency and Bankruptcy Code. “There are several factors that need to be considered. The RBI norm anyway provides for 25 per cent haircut for sub-standard assets," said Shanker Iyer, CFO, Bank of India.
"I think banks will have to take 40-50 per cent haircut," said another official with state-run lender. "Logically speaking, these accounts are there for last 3-4 years and considering 10-10.5 per cent depreciation in asset value, we may arrive at 30-35 per cent depletion in asset price. Further, a new investor would seek another 5 per cent commission on these assets," the official explained.
"Our discussions with insolvency experts indicate expected haircut of 50-60 per cent under insolvency proceedings. Indian corporate lenders carry an aggregate provision coverage of 37 per cent on their bad loans," Ravi Singh, research analyst, Ambit wrote in report.
However, the biggest hurdle for the banks to resolve the bad loan issue under the Insolvency and Bankruptcy Code is the surplus capacity in the economy, which will deter several groups to bid for assets even at the discounted rate, analysts said.
"The resolution process with definite timeline-under IBC, resolution plan has to be implemented within 180 days. This may call for slightly higher provisions based on potential haircuts (separate guidelines to be issued), leading to higher capital requirement," said Nilesh Parikh, Research Analyst, Edelweiss Securities Ltd.
The key issue remains of expediting cases at NCLT. There are not adequate benches to run the trial and hence it will be a time consuming rocess.
Most analysts termed the RBI move as building credible roadmap resolution to NPA problem. Total NPAs of the banking system stand at over Rs 8 lakh crore, of which Rs 6 lakh crore is with PSBs. Last month, the government had cleared an ordinance to amend the Banking Regulation Act, giving the RBI more powers to direct banks to resolve bad loans. Bankers, however, are worried about the haircut they may have to take if the accounts go into liquidation.
With inputs from PTI & TickerNews Service