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Bhushan, Essar Steel among 12 cos being moved to insolvency courts: Sources

Bank groups plan meetings in next two weeks to decide action

Reuters  |  Mumbai 

People walk past a barricade inside the Reserve Bank of India (RBI) headquarters in Mumbai (Photo: Reuters)

The Reserve Bank of India (RBI) has asked lenders to initiate bankruptcy proceedings against a dozen companies, including Essar Steel, Steel Ltd, Ispat and Energy Ltd, sources with direct knowledge of the matter said.

This follows a change enacted in laws last month that gives the Reserve Bank of India greater power to address the $150 billion stressed loan problem plaguing growth in Asia's third-largest economy. This week, the said it had identified 12 of the country's biggest loan defaulters.

Jaypee Infratech, Electrosteel Steels, unlisted Power & Steel, textiles maker Alok Industries, ABG Shipyard and Jyoti Structures are also among the firms that will be taken to courts by the RBI, said the sources, who asked not to be named as the list was not public.

The has yet to officially name any of the 12 companies, which account for about Rs 2 lakh crore ($31 billion) of India's non-performing loans, or roughly 25 percent of all the country's

CNBC TV18, which reported the 12 names earlier on Friday, also said Lanco Infratech, Amtek Auto and Era Infra Engineering were on the list. Reuters could not immediately verify these three names.

According to the television station, has asked banks to initiate bankruptcy proceedings against six of the firms within 15 days and to file petitions for the others within 30 days.

The had no official comment.

A spokesman for declined to comment, while a spokesman for Electrosteel said they had heard from their main lender that creditors wanted to initiate resolution of the unpaid loans through the National Company Law Tribunal.

The NCLT has been appointed as the nodal court for and bankruptcy proceedings in India. A bankruptcy filing would result in recovering some funds owed through a debt restructuring, or ultimately through liquidation of the company.

Such action means banks would no longer leave bad debt on their books and it could force them to put more money aside to cover losses - at a time when funds are already short as banks seek to comply with international capital standards.

The filings could have far reaching implications, as India's new code sets out a tight deadline for restructuring resolutions to be struck, failing which the defaulters would be moved into forced liquidation, potentially leading to further value erosion and jeopardising tens of thousands of jobs at the heavy industry on the list.

Indian banks typically lend larger sums in groups. Lead banks plan to call meetings of the groups over the next two weeks to decide the next course of action, one source said.

Jaypee Infratech, Lanco, Steel, Monnet, Power & Steel, Jyoti, Era, Amtek, Alok and ABG were not immediately reachable for comments.

($1 = 64.4400 Indian rupees)