The Reserve Bank of India (RBI) formally turned down requests from banks to extend the deadline for restructuring the debt of companies on a second list of bad loan accounts that it had issued in August. This will mean bankruptcy proceedings likely kicking off at the National Company Law Tribunal (NCLT) by December 31 for companies such as Videocon Industries, Jaiprakash Associates, Uttam Galva Steel, Essar Projects, Jaiswal Neco and Asian Colour Coated.
The central bank also declined to relax any of its other stipulations, including the process related to restructuring outside the bankruptcy court, in its letter to lenders on Wednesday evening. RBI said those accounts that were not recast as per rules stipulated in August will have to enter the insolvency process, said two senior bank officials who did not want to be named.
“We reiterate that all the conditions specified should be met… We regret that request for any extension of time or any case specific dispensation cannot be granted,” RBI said in its letter, which EThas seen.
RBI had said in August that lenders to the 28 defaulting companies had until December 13 to find a resolution plan in accordance with a formula prescribed by it. If the banks failed to do so, the companies had to be referred to the NCLT.
Resolution plans were drawn up for some of the companies on the list by the deadline. These include Soma Enterprises under the Scheme for Sustainable Structuring of Stressed Assets (S4A) and a one-time settlement in the case of Anrak Aluminium.
Lenders are set to inform RBI that restructuring of BILT and Jaiprakash Associates has already been completed, said people aware of the matter. The companies likely headed to NCLT are Asian Colour Coated, Jai Balaji, Jaiswal Neco, Visa Steel, Videocon Telecom, Essar Projects and Monnet Power.
The central bank issued its first list of 12 companies in June, directing banks to immediately refer them to bankruptcy court. They included Essar Steel, Bhushan Steel, Lanco, ABG Shipyard, Bhushan Power and Alok Industries. However, while issuing the second list, RBI gave banks time till December end to resolve debt.
It said a recast package outside the NCLT would only valid be if two rating agencies rated the sustainable portion of the debt at investment grade. The RBI letter on Wednesday was in response to the dispensation sought by some banks regarding the terms of restructuring outside NCLT and others seeking an extension of the deadline.
“Any extension of forbearance to banks on stressed assets should be viewed as a larger responsibility of the regulator to dovetail the interests of both the lenders and borrowers,” the central bank had said in its Financial Stability Report last week. “The RBI has been prudent enough to adopt a ‘carrot and stick’ approach while devising these regulations which has also ensured that the borrowers have maintained their ‘skin in the game’.”
Of the companies on the second list, lenders have already referred 10 companies to NCLT. They include Nagarjuna Oil Refinery, Uttam Galva Metaliks, IVRCL, SEL Manufacturing, Castex Technologies, Orchid Pharma, Ruchi Soya, Ushdev International, Coastal Paper and Unity Infraprojects.