MUMBAI: The Rerserve Bank of India has finally broken down the polite fiction on tackling bad loans.
On Tuesday, it identified a whopping Rs 2 lakh crore worth bad loans, or 25 per cent of the total Rs 8 lakh crore NPAs, to be resolved under the Insolvency and Bankruptcy Code (IBC). The move pertains to 12 accounts, each having more than Rs 5,000 crore of outstanding loans.
These borrowers who were until now in debt, will soon be out of luck. According to IBC, insolvency resolution needs to be completed within 180 days, failing which, their assets may be sold to repay creditors.
Express was the first to report last month that RBI was working on a time-bound resolution for NPAs and was targeting to resolve the top 30-40 large accounts in the next 6-9 months.
This is also the first major move by RBI following the amendment to the Banking Regulations Act, 1949, giving it more teeth to tackle the toxic loan pile. Large borrowers account for over 60-70 per cent of the total NPAs.
Without naming the defaulters, RBI said the banks will be asked to initiate proceedings to recover the dues. IAC, the Internal Advisory Committee of RBI said it has arrived at an objective, non-discretionary criterion for referring accounts for resolution under IBC.
“In particular, the IAC recommended for IBC reference of all accounts with fund and non-fund based outstanding amount greatly than Rs 5,000 crore, with 60 per cent or more classified as non-performing by banks as on 31 March, 2016,” RBI said in a statement.
The central bank, based on the recommendations of the IAC, will accordingly be issuing directions to banks to file for insolvency proceedings under IBC in the identified accounts. Such cases will be accorded priority by the National Company Law Tribunal.
