Lenders meet today to review insolvency cases

It would be the first such exercise since the RBI directed action on 12 big-size bad loan cases

Bank representatives are to meet here on Monday for a review of the work done on the resolution process under the Insolvency and Bankruptcy Code (IBC).

It would be the first such exercise since the Reserve Bank of India (RBI), on June 13, directed action on 12 big-size bad loan cases.

The aim is to improve on coordination and execution, besides highlighting issues with procedures at the National Company Law Tribunal (NCLT). The body has come into focus since these 12 large non-performing asset (NPA) accounts had come before it. These accounts are about a fourth of the total of NPAs in the banking system. 

The companies in question include Essar Steel, Bhushan Steel, Bhushan Power and Steel, Lanco Infratech and Jaypee Infratech. RBI’s internal panel had recommended referring to the NCLT all accounts with dues exceeding Rs 5,000 crore, with at least 60 per cent classified as NPA by banks as of end-March 2016.

For other NPAs, the panel recommended that banks finalise a resolution plan within six months. Where a viable one isn’t agreed on, banks should be required to file for insolvency. 

The IBC provides 180 days for completion of this process, extendable by another 90 days. The chief executive of a large Mumbai-based lender said the experience was satisfactory so far. However, banks had to mull on delaying tactics by recalcitrant borrowers, pressure on NCLT benches and the working of Insolvency Resolution Professionals. 

Borrowers have been taking the lenders to court on various legal grounds, too. Essar Steel, for instance, had petitioned the high court in Gujarat against the insolvency proceedings initiated at the NCLT. 

A senior public sector executive said many defaulting borrowers were now coming with proposals for repayment and resolution, to avoid insolvency proceedings.