SBI to move NCLT over bad debts

Energy industry provides big-ticket cases under Bankruptcy Code

State Bank of India (SBI) is planning to take the insolvency route to recover non-performing assets (NPAs).

According to sources, SBI is planning to take steel and coal companies to the National Company Law Tribunal (NCLT).

The bank did not comment on Business Standard’s query on the issue.

SBI’s gross NPAs of Rs 1,12,343 crore on March 31, 2017, constitute one-sixth of the total bad debts of public sector banks.

Six months after the notification of the Insolvency and Bankruptcy Code, a number of big-ticket filings have been made in the NCLT. In May, filings worth Rs 10,000 crore were initiated, one of them being against the Kolkata-based steel company Ramsarup Industries, which has a principal debt of Rs 2,000 crore.

Other companies facing insolvency proceeding include Uttam Galva Steel, Gujarat NRE Coke, Marmagoa Steel and Facor Steel. Gujarat NRE Coke, listed on the National Stock Exchange, has debts of Rs 3,880 crore.

Biodiesel manufacturer Gujarat Oleo Chemical has debts of almost Rs 5,000 crore and has filed for insolvency in the Ahmedabad bench of the NCLT.

Insolvency filings in the steel sector amount to over Rs 20,000 crore, some initiated by creditors and others by the companies themselves. Executives of a company that has filed for insolvency said the government’s earlier policies were to blame for the poor state of power companies.

The Supreme Court in August 2014 cancelled all coal block allocations over the past two decades. Around Rs 2.85 lakh crore of investment in 218 coal blocks went down the drain with this order and close to 28,000 Mw of power capacity became stranded. 

“The bad debts of some of the core industries, such as metals and power, constitute a large chunk of bad debts overall. Banks are taking possession of these assets and are seeking a change in ownership,” said Debashish Mishra, partner at Deloitte.

Most of these cases are transfers from the Board of Industrial and Financial Restructuring (BIFR). The Bankruptcy Code was enacted to restructure sick companies and help banks sort out their NPA mess.

A recently promulgated ordinance empowers the Reserve Bank of India to ask banks to initiate insolvency proceedings and recover bad loans. Finance Minister Arun Jaitley yesterday said the RBI was finalising a list of borrowers for resolution under the insolvency and bankruptcy law.

With inputs from Shreya Jai