IBC a big success story for cleaning banking system: Rajiv Kumar

The acquisition of debt-ridden Bhushan Steel by Tata Steel reflects success of the insolvency and bankruptcy law which will help in cleansing the banking system as well as boost lenders' profitability, Financial Services Secretary Rajiv Kumar said today.

Bamnipal Steel Ltd (BNPL), a wholly-owned subsidiary of Tata Steel, has successfully completed the acquisition of controlling stake of 72.65 per cent in Bhushan Steel Ltd (BSL) for consideration of Rs 36,400 crore. This amount would go directly to lenders improving their bottomlines.

Tata Steel won the bid to acquire debt-laden Bhushan Steel Ltd (BSL) in an insolvency auction. The bankrupt firm was among the 12 stressed assets that the RBI had referred to the NCLT proceedings last year.

"It is a historic day as banks recover Rs 36,400 crore from sale of Bhushan Steels to Tata Steel under Insolvency and Bankruptcy Code. Banks will gain from write back. Result of silent and transformative change in credit culture," he told PTI.

The outstanding principle amount to a consortium of lenders was Rs 44,000 crore excluding interest.

"It is changing the culture and ethics by a sound exit route where bad assets can be sold at reasonably high value," he said, adding Tata Steel's acquisition of Bhushan Steel gives a clear signal to non-serious businesses to mend their ways or exit.

It may be recalled that the government barred promoters of defaulting companies from participating in the IBC process putting a check on defaulters gaining backdoor entry in the same business.

There are cases where debtors are now coming on their own and resolving the cases outside the IBC, he said.