Bilcare debt recast gets complicated

United Bank of India labelling dues as non-performing assets

The proposal for corporate debt restructuring (CDR) of the unpaid debt of Bilcare, a packaging solutions provider, has one complication — one of the lenders, United Bank of India, had earlier publicly issued the company a showcause notice on why it should not be declared a wilful defaulter.

Bilcare has taken loans totalling Rs 1,500 crore from a consortium of banks, which have referred the case for CDR.

The unpaid dues to Kolkata-based UBI, part of the consortium, are Rs 51 crore. Last month, UBI had issued a public notice in a national daily, classifying Bilcare’s dues as a non-performing asset (NPA) and said the company had not paid it despite repeated reminders.

Since the matter has been referred to the CDR cell, the body has asked UBI for its view. A proposal for debt recast will only go through if at least 60 per cent of the lenders and 75 per cent of them by value of the loan agree.

Union finance minister P Chidambaram has rapped wilful defaulters and asked public sector banks to be aggressive on recovery. “We cannot have an affluent promoter and a sick company,” Chidambaram had said last month after a meeting with chief executives of public sector banks. All public sector banks (PSBs) have been asked to frame a board-approved recovery policy and to constitute a board-level committee for monitoring of recovery. The top 300 NPA accounts are to be reviewed by the management committee of the board.

The Reserve Bank of India (RBI) has also, several times, questioned why PSBs carry a disproportionate burden of debt recast as compared to their private sector counterparts.

The ratio of restructured standard advances to gross advances has almost doubled in a year for PSBs. According to finance ministry data, the restructured standard advances ratio increased to 7.41 per cent in December 2012 from 3.46 per cent a year before. The gross NPA ratio of PSBs rose to 4.18 per cent from 3.22 per cent during this period.