Mumbai: As the deadline set by the Reserve Bank of India (RBI) for resolution of stressed assets ended Monday, lenders have decided to refer 20 of at least 32 NPA accounts to bankruptcy courts, according to two bankers aware of the matter. For the remaining 12 NPA accounts, lenders will either restructure the debt or initiate sale proceedings, the bankers said on condition of anonymity.
On 12 February, RBI had set a 180-day timeline starting 1 March for resolving large corporate loan defaults, failing which banks have to refer these cases for insolvency proceedings.
Among the 20 new accounts that will be referred to the National Company Law Tribunal (NCLT), a majority—including Essar Power, Korba West Power Co. Ltd, Jindal India Thermal Ltd and Sravant Energy Pvt. Ltd—are power projects. The list also has metal companies, including BMM Ispat Ltd, ISMT Ltd, BRG Iron and Steel and Splendid Metal Products Ltd. Reliance Naval is also among the companies that will be referred to bankruptcy courts.
Lenders have, however, decided to restructure the outstanding debt of Videocon Oil Ventures Ltd, GMR Rajahmundry Ltd and Jaiprakash Power Ventures Ltd.
Banks have received bids from Edelweiss Asset Reconstruction Co. to acquire two accounts—Coastal Energen Pvt. Ltd and GTL Infrastructure Ltd. Edelweiss Asset has bid ₹ 3,200 crore for Coastel Energen and ₹ 2,400 crore for GTL Infra. The asset reconstruction company is also exploring the option of teaming up with foreign lenders to bid for these assets.
According to one of the two bankers cited earlier, lenders have decided to sell Prayagraj Power Generation Company to Tata group and ICICI Venture-backed Resurgent Power Ventures and SKS Power Generation (Chhattisgarh) Ltd to Singapore-based Agritrade Resources.
Lenders have agreed for a one-time settlement in the case of GMR Chhattisgarh Energy Ltd. A Bloomberg report on Monday said Adani Power Ltd is looking to acquire the 1,370-megawatt GMR Chhattisgarh Energy. The deal is likely to be announced in the next few weeks after lenders give a formal approval, the report said.
Emails and messages sent to a majority of the companies failed to elicit any response. Sravanti Energy declined to comment, as the matter is under judicial review.
The central bank, through its 12 February circular, asked banks to craft resolution plans for defaulted accounts within 180 days in cases where the exposure is more than ₹ 2,000 crore. The central bank also introduced the concept of a one-day default, under which banks have to identify incipient stress when repayments are overdue even by a day.
Last year, lenders referred a total of 40 large corporate accounts worth ₹ 3.5 trillion to NCLT for initiating insolvency proceedings.
Lenders such as State Bank of India believe that admission of these accounts to NCLT will not have an additional impact on the bank’s provision requirement.
“The 27 August deadline would not have any material impact on the provisioning requirements as most of them have already been classified as bad loans. There is not going to be any accelerated provisions for these accounts since the February 12 circular doesn’t mention it," said SBI chairman Rajnish Kumar.
The Allahabad high court on Monday refused to grant interim relief to power companies against the RBI circular. Consequently, several power companies are now likely to be referred to NCLT. The high court had earlier ordered lenders to avoid acting against these power producers. The companies, however, have the option of challenging the high court judgement in the Supreme Court.
“The resolution process will take its own course, the judgement does not make a difference," said Rajkiran Rao, managing director and chief executive officer, Union Bank of India. “The issue of how many accounts will go to NCLT will be discussed because we have another 15 days’ time to decide (on taking them to NCLT)."