MUMBAI: Ending months of hand-wringing, banks are showing some tough love on defaulting borrowers. After several failed attempts to fix the bad-loan pile, lenders are being forced to initiate insolvency proceedings on nearly three dozen companies that have been missing repayments, wilfully or otherwise.
With the Reserve Bank of India (RBI)’s deadline to resolve stressed accounts ending on Wednesday, banks are set to refer at least 23 debt-erring firms to the National Company Law Tribunal (NCLT). These firms are part of the 28 large stressed accounts that the banking regulator had identified as part of its second list in August.
In June, it had identified 12 large stressed accounts, which together accounted for about a quarter of the total `10 lakh crore worth of bad loans. Of this, 11 are under insolvency proceedings at the NCLT.
The 28 stressed accounts are estimated to account for a whopping 40 per cent of the sector’s bad loans. Together, the top 40 stressed loans under insolvency and resolution process account for nearly 75 per cent of the system’s toxic loan pile.
“There have been various efforts in the past, but this time, we are working on a time-bound manner to resolve the NPA issue,” a senior banker told Express, adding that the public-sector bank has exposure to a majority of the top 40 accounts.
He added that the lender has sought more time, but it was unlikely that the regulator would oblige.
Some of the firms that failed to pass the resolution muster include IVRCL, East Coast Energy, Orchid Pharma, Uttam Galva Steels, Visa Steel, Nagarjuna Oil Refinery, and Ruchi Soya Industries.
Banks will now have to refer these accounts to the NCLT in the next 18 days — that is, by December 31. They also have to make a provision of 50 per cent by March 2018.
Stressed Firms’ status
There are 28 stressed accounts in public-sector banks that account for 40 per cent of the sector’s bad loans. The banks will refer at least 23 firms, which failed to meet the resolution criteria, to the National Company Law Tribunal. Some firms include IVRCL, East Coast Energy, Orchid Pharma, Uttam Galva Steels, Visa Steel, Nagarjuna Oil Refinery, and Ruchi Soya Industries