Home >Industry >Banking >SBI looks to name IRPs for NPA accounts on RBI’s second defaulter list
Bankers, including SBI, are proceeding with insolvency proceedings against Coastal Projects, IVRCL, Monnet Power after they failed to meet investment grade ratings. Photo: Aniruddha Chowdhury/Mint
Bankers, including SBI, are proceeding with insolvency proceedings against Coastal Projects, IVRCL, Monnet Power after they failed to meet investment grade ratings. Photo: Aniruddha Chowdhury/Mint

SBI looks to name IRPs for NPA accounts on RBI’s second defaulter list

SBI is said to have sought insolvency resolution professionals (IRPs) for Coastal Projects, IVRCL, Monnet Power named in RBI's second defaulter list

Mumbai: State Bank of India (SBI) is seeking to select insolvency resolution professionals for the second list of firms identified by the Reserve Bank of India (RBI) for bankruptcy proceedings, two people in the know said.

As a first step, SBI has sought resolution professionals for a few firms, including Coastal Projects Ltd, IVRCL Ltd, SEL Manufacturing Co. Ltd, Shakti Bhog Foods Ltd and Monnet Power Ltd, the two said, requesting anonymity.

Bankers decided to proceed with insolvency proceedings against some of these firms after they found they failed to meet investment grade rating, according to one of the two people.

RBI had mandated that the debt resolved outside the ambit of the insolvency and bankruptcy code (IBC) be rated as investment grade by two external credit rating agencies.Among these cases, rating agencies have downgraded IVRCL to default status due to weak financial performance and inability to service debt while for others such as Monnet Power, SEL Manufacturing and Shakti Bhog, some rating companies have suspended coverage due to inadequate information.

“We have received the request for proposal seeking appointment of a resolution professional in cases from the second list," said a resolution practitioner with a consulting firm, the second of the two people cited earlier.

To be sure, while lenders can select resolution professionals, their appointment is done by the National Company Law Tribunal after it admits these cases under IBC.

Ratings apart, lenders have also failed to restructure the debt in some of these firms. In some cases such as Orchid Pharma and Unity Infra Projects, NCLT proceedings are already underway and lenders will not have to approach the tribunal separately.

“We have submitted resolution-cum-revival plan to the monitoring institution (MI) i.e., SBI. We are expecting it will be considered positively," said T. Srinivasa Rao, director, Coastal Projects Ltd.

Sandeep Jajodia, chairman and managing director, Monnet group, said lenders were deliberating on approaching NCLT for Monnet Power. Insolvency petition against Monnet Ispat and Energy Ltd, which was part of RBI’s first list, was accepted by NCLT on 18 July.

Emails written to IVRCL, Shakti Bhog Foods, and SEL Manufacturing did not elicit any response.

SBI did not respond to queries.

Mint had reported on 15 September that lenders are likely to refer majority of stressed cases in RBI’s second list for insolvency proceedings. The report said lenders find it more comfortable taking a decision within the ambit of NCLT because of the large sacrifices they would have to make.

A July report by Crisil estimated banks have made around 40% provisioning against top 50 accounts and will require an incremental provisioning of about 20%.

According to a EY report released in August, 1,000 cases have been filed with NCLT under IBC so far, of which 220 are admitted.

“It needs to be seen if policymakers and regulators want to evolve an organized learning from this process or look at experimenting with large number of cases to come to a logical conclusion,“ said Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services Llp.

At the end of August, RBI had sent a list of 29 firms to banks. In a letter, RBI said these accounts should first be resolved through any of RBI’s schemes before 13 December, failing which cases should be filed against these firms under IBC at the National Company Law Tribunal (NCLT) before 31 December.

In June, RBI had sent a list of 12 accounts to banks to start insolvency proceedings.

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