Banks take charge to recover bad loans worth Rs 1.5 lakh crore–Economic Times–16-06-2017

  1. Banks are getting into loan recovery overdrive. At least six meetings of joint lenders’ forums have been called next week to finalise the resolution of loans aggregating nearly Rs 1.5 lakh crore involving Essar SteelBSE 0.41 %, Bhushan SteelBSE 2.18 %, Alok IndustriesBSE 0.36 %, Monnet Ispat, Jyoti Structures and Electrosteel SteelsBSE -1.40 %, said three people familiar with the development.
  2. State Bank of India has taken the lead in the banks’ initiative, which follows the Reserve Bank of India’s order to initiate insolvency and bankruptcy proceedings against the top 12 defaulters that account for a quarter of total bad loans in the banking system.
  3. The move is partly driven by the inherent fear that minor creditors could take companies to the brink of liquidation before making any meaningful attempts to resolve bad loans with a financial package, including equity investments from existing shareholders.
  4. “There has to be unanimity among lenders on the resolution of loans since time is of essence once the case reaches the National Company Law Tribunal (NCLT),” said an SBI executive who did not want to be identified.
  5. Bad loan recovery has gathered momentum after years of dithering since the government empowered RBI to direct banks to take big defaulters through the process prescribed under the Insolvency and Bankruptcy Code that specifies timebound resolution.
  6. Banks that have been hesitant to follow this route fearing huge writedowns of asset values have been forced get cracking following the Reserve Bank’s directive.
  7. “SBI has called for JLF meetings for six accounts and asked all members in the consortium to confirm the dates,” said another banker who preferred anonymity.
  8. The six accounts are said to be Essar Steel, Bhushan Steel, Electrosteel Steels, Alok Industries, Monnet Ispat, and Jyoti Structures.
  9. Neither the banks nor the regulator have disclosed the names of defaulters that will be taken through the IBC process. The companies couldn’t be immediately reached for comment.
  10. Once a case is admitted in the NCLT under the IBC, banks will have to find a solution in 180-270 days, failing which the assets of the company will have to be liquidated to recover the dues.
  11. Gross bad loans of banks amounted to Rs 7 lakh crore at the end of March. If restructured loans are added and classified as stressed assets, this rises to Rs 12 lakh crore, according to some analyst estimates.
  12. During the JLF meetings, banks will have one round of internal discussions to finalise the resolution strategy. This will be followed by a second round with the defaulters where they will be presented with the options for them to sign off on.
  13. “It is almost certain that all these big accounts will to go to NCLT and it is a matter of time before the promoters realise that they either shape up or ship out,” said another banker at a state-run lender.

via NPAs: Banks take charge to recover bad loans worth Rs 1.5 lakh crore – The Economic Times

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