RBI tells banks to file cases against 12 big loan defaulters in a month

Mumbai: The Reserve Bank of India (RBI) has sent to commercial banks the list of 12 defaulters against whom it wants creditors to invoke immediate bankruptcy proceedings, said five bankers aware of the development.

In a letter, the central bank said cases should be filed under the Insolvency & Bankruptcy Code (IBC) at the National Company Law Tribunal (NCLT) against the 12 within a month, these bankers said on condition of anonymity.

The defaulters’ list comprises Bhushan Steel Ltd, Bhushan Power & Steel Ltd, Essar Steel Ltd, Jaypee Infratech Ltd, Lanco Infratech Ltd, Monnet Ispat & Energy Ltd, Jyoti Structures Ltd, Electrosteel Steels Ltd, Amtek Auto Ltd, Era Infra Engineering Ltd, Alok Industries Ltd and ABG Shipyard Ltd, according to the bankers. Mint hasn’t seen a copy of the list.

ABG Shipyard declined to comment. Executives from Bhushan Power & Steel and Alok Industries and an Essar Steel spokesperson said they hadn’t heard from lenders. Officials from Amtek Auto, Era Infra, Jyoti Structures and Electrosteel couldn’t be reached for comment. The other companies didn’t respond to emails or messages seeking comment.

‘We may not comment since this is a client-specific matter,” said an IDBI Bank Ltd spokesperson. Other lead banks among the creditors didn’t respond.

State Bank of India, the lead banker in six accounts, has scheduled a joint lenders’ forum (JLF) meeting to chart out a plan for trying these companies at the NCLT, according to two of the five bankers cited earlier.

“We will try to plug all the loopholes in the accounts in the coming JLF meeting to avoid delay in proceedings,” said one of the bankers cited earlier.

The central bank has initiated the process under the powers given to it by a 5 May ordinance that amended the Banking Regulation Act to resolve the Rs10 trillion of stressed assets pile choking the banking system.

On Tuesday, RBI said accounts with outstanding amounts of more than Rs5,000 crore, of which at least 60% was classified as non-performing by banks as of 31 March 2016, can be referred for bankruptcy.

Under the IBC, once a case is admitted by the NCLT, a resolution plan must be in place within 180 days of admission. This is extendable by up to 90 days. In case there is no plan or the committee does not agree on one, the company will go into liquidation.

Separately, RBI deputy governor S.S. Mundra said on Friday that there are no plans to come out with another list anytime soon. RBI has already asked banks to finalize a resolution plan for other stressed accounts in the next six months.

Bankers worry that they will have to forego a large part of the dues owed to them and also set aside more money against the accounts once bankruptcy proceedings begin. RBI said on Tuesday that it would release revised provisioning norms for cases accepted under the IBC.

For a lasting solution, the government will have to infuse more capital into state-owned banks. Mundra said public sector banks will require more capital than the budgeted allocation of Rs70,000 crore for the four fiscal years through March 2019.

“With this, we can expect promoters proactively coming forward to finding a solution. However we do not expect any material resolution before FY19,” said Saswata Guha, director, Fitch Ratings.