RBI Sends Second List Of Cases To Banks For Insolvency Action
The Reserve Bank of India (RBI) has sent a second list of defaulting companies to lenders, recommending that these firms be referred for resolution via the Insolvency & Bankruptcy Code, two bankers with knowledge of the matter said on the condition of anonymity. However, the RBI has given banks until December to try and come up with a resolution plan, failing which the firms must be taken to bankruptcy court, said these bankers.
There are close to 30-40 firms in this second list, confirmed the bankers quoted above who added that each bank has received names of firms to which they have exposure.
In June, the RBI had identified 12 large accounts, which made up 25 percent of the banking system’s gross non performing assets (NPAs), and asked banks to refer these for resolution under the IBC. 11 of these 12 cases have been admitted and insolvency proceedings have been initiated.
The second list send to bankers follows this. An email sent to the RBI spokesperson seeking details was not immediately answered.
According to at least three banking sources, the companies in the second list include:
- Jaiprakash Associates
- Videocon Industries
- Jaiswal NECO
- VISA Steel
- Essar Projects
- SEL Manufacturing
- Asian Colour Coated Ispat
- Soma Enterprises
This is not an exhaustive list as BloombergQuint could not ascertain all the names circulated to banks by the RBI.
A spokesperson for Jaiprakash Associates denied the news and said that the media is misrepresenting information. The spokesperson added that that Jaypee Infratech Ltd (JIL) and Jaiprakash Associates Ltd (JAL) are separate corporate entities.
"We can unequivocally confirm that IDBI Bank Ltd. referred JIL to NCLT on 9th August,
2017 and CIRP (corporate insolvency resolution process) are underway,” said the spokesperson in an email response to BloombergQuint.
Venugopal Dhoot, chairman of Videocon Industries also said the information was incorrect. A resolution plan for the company is already being worked upon and would be finalised by the beginning of September, he told BloombergQuint over the phone.
Calls made to senior management at Jaiswal NECO and Visa Steel were not immediately answered. An Essar group spokesperson was not available for comment.
In the first round, the RBI had used a benchmark criteria based on which the 12 firms had been identified. As per the criteria, all large corporate accounts with fund and non-fund based exposure of Rs 5,000 crore and above each, and where more than 60 percent of the loans had turned bad as on March 31 last year, would qualify for insolvency proceedings.
At the time, the RBI had warned that another set of companies may need to be referred for insolvency at a later stage.
“As regards the other non-performing accounts which do not qualify under the above criteria, the IAC recommended that banks should finalise a resolution plan within six months. In cases where a viable resolution plan is not agreed upon within six months, banks should be required to file for insolvency proceedings under the IBC,” the RBI had said in its release dated June 13.
It appears to have stuck to that timeline, giving banks until December to resolve these accounts and refer them for insolvency if a resolution plan cannot be finalised.
The RBI is trying to make sure that the NPA problem is addressed completely, said Kalpesh Mehta, partner at Deloitte Haskins and Sells. He added that going by the first 12 cases, the insolvency process appears to be progressing smoothly.
Indian lenders had more than Rs 8 lakh crore in gross NPAs as of June 2017. A significant chunk of these NPAs come from large accounts. As such, the RBI feels that resolving the top 40-50 bad loan accounts will make a significant difference in the asset quality of the banking sector.