SBI sets up team to track loan default resolutions
Mumbai: State Bank of India (SBI) has set up a team of experts to deal with the resolution process of at least 32 defaulters and a few of them have already been referred to insolvency courts, according to three people aware of the matter.
All these cases have been identified by the Reserve Bank of India (RBI) in its two lists of around 40 defaulters sent to banks.
Twelve cases have already been referred to National Company Law Tribunal (NCLT), which handles insolvency matters, following the 13 June directive of RBI. The remaining accounts are part of RBI’s second list, where banks have to come up with a resolution by 13 December. If they fail to draw a resolution plan, RBI has mandated banks to take these borrowers to NCLT. SBI has exposure to at least 20 accounts that are part of the second list of defaulter accounts. The move to set up a dedicated team is to ensure quicker decision making, said one of the three people, requesting anonymity.
“Right now the NCLT related accounts are being handled by various teams at the bank in a scattered way. Setting up a dedicated team will bring in a sharper focus to track these accounts,” he said.
According to the second person, NCLT process requires extensive follow-ups and coordination with internal teams, as well external agencies such as lawyers, consortium banks, and resolution professionals. This has resulted in added pressure on mid and large corporate business units.
“With a team of experts specifically looking into NCLT cases, some amount of pressure will ease and these units can focus on new business of better corporates, especially when we are going into the second half of the fiscal, which is usually busy season for credit,” this person said.
Existing stressed assets management group (SAMG) will focus on recoveries through other means such as restructuring under various schemes of RBI as well as selling bad loans to asset reconstruction companies.
SAMG as well as corporate account units will provide inputs on each of these 32 cases as and when required by the monitoring team.
According to sector experts, other banks may follow suit because lenders allocating time and resources, in all possible ways, with an objective of cleaning the so-called balance sheet mess.
Indian banks’ stressed loans have ballooned to around Rs10 trillion.
Saswat Guha, director, Fitch Ratings, said that the central bank is assigning tough deadlines on resolution of these large identified borrowers and it is natural for banks to go that extra distance because the regulator is monitoring the progress.
“Virtually every bank is trying to be proactive in the resolution process, as much as possible, because once the company goes into liquidation; recovery becomes an uncertainty. Resolution may still offer banks a reasonable chance to revive an account by taking moderate levels of haircut,” he said.