Banks warn of 'severe plunge' in recoveries after bankruptcy ruling

Banks are joining foreign funds including SC Lowy in predicting risks from the Essar Steel sale

A group of lenders led by State Bank of India, the country’s largest, foresees further distress in the nation’s bad-debt laden financial sector unless a recent court ruling in a closely watched insolvency case isn’t overturned.

A court earlier this month allowed ArcelorMittal’s $6 billion purchase of Essar Steel, and also modified the distribution of the proceeds, saying the money has to be shared proportionately. A petition filed by the banks in the country’s top court seeks to quash the bankruptcy tribunal’s ruling, court filings seen by Bloomberg show.

The ruling that placed secured creditors like banks at