FinMin to review IBC cases, NPA recovery next week

With little possibility of the two big ticket IBC cases -- Essar Steel and Bhushan Power and Steel -- happening this fiscal, Department of Financial Services will meet the PSU banks on March 18 to review status of their NPA.

The department has set NPA recovery target of Rs 1.8 lakh crore for PSBs. This has to be achieved by March-end.

The meeting is over video-conferencing on IBC, said a banking source, adding a senior DFS official will review the NPA recovery status of individual banks and the overall target.

Last year, Financial Services Secretary Rajiv Kumar had said that recoveries of about Rs 1.8 lakh crore were assessed by banks which would be from cases under Insolvency and Bankruptcy Code and those outside it. So far the recovery has been Rs 1.1 lakh crore where Essar Steel resolution still may happen, hopes Finance Ministry.

The two key NCLT cases of Essar Steel and Bhushan Steel and Power have not seen finality for the lenders. NCLAT has now asked the Ruias to first clear all dues of nearly Rs 1.4 lakh crore to consider its bid for Essar steel.

The Ahmedabad bench of the National Company Law Tribunal (NCLT) has already approved ArcelorMittal's Rs 42,000-crore bid for the company last week which has now been challenged by Essar Steel's previous promoters Ruias. So there may be decision on Essar extending beyond this fiscal, Finance Ministry sources say.

SBI has over Rs 15,000 crore exposure to Essar and Bank of India has Rs 1,800 crore and PNB has Rs 2,500 crore to get from Essar resolution.

"If the resolution does not happen by end-March, the banks will have to make additional provisioning of Rs 10,000 crore total , said the source .

The total of claims admitted by the financial creditors in Essar Steel and Bhushan Power & Steel, the two big-ticket cases of the RBI's first 12 list, are Rs 49,479 crore and Rs 47,145 crore, respectively.

Finance ministry was expecting five or six accounts from the 12 in the RBI's first list could be resolved by end-March. The resolutions achieved so far are on Bhushan Steel, Electrosteel Steels and Monnet Ispat & Energy. The 12 large accounts where resolution under the IBC was initiated by banks mandated by RBI with claims for Rs 3.50 lakh crore as against a liquidation value of Rs 75,000 crore.

Fresh NPAs in the banking sector are expected to moderate to 1.9 per cent to 2.4 per cent in FY20 due to an aggressive recovery drive and write-offs by banks, ratings firm Icra has said. Public sector banks are expected to turn profitable after four consecutive years of losses.

Finance Ministry sources said big ticket recoveries were due this month or in March from Essar Steel and Bhushan Power & Steel which together can fetch over Rs 60,000 crore. And they are just a few among the many. Big ticket recoveries were due in March from Essar Steel and Bhushan Power & Steel which together can fetch over Rs 60,000 crore.

Icra expects gross NPAs of the banking sector to be 8.3 lakh crore or 7.9 per cent for March 2020, as compared to the estimated 9.2 per cent as of March 2019.

However, even with the new bankruptcy law in place, recoveries through NCLT have not been very large, it said. But recoveries of around Rs 1.6-1.7 lakh crore from accounts referred to NCLT amount to 75-80 per cent of the recoveries from these accounts and this is higher than the provisions made by these banks.

In 2018, over Rs 80,000 crore was recovered from various corporate debtors under IBC, according to the Ministry of Corporate Affairs Secretary earlier.

(Anjana Das can be contacted at anjana.d@ians.in)

--IANS

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