It's been a fortnight since the ordinance was passed for speedy resolution of NPAs but banks still await formation of oversight committees
Banks are waiting for the Reserve Bank of India (RBI) to set up oversight committees (OCs) for speedy resolution of 50 large non-performing corporate loan accounts.
The OCs are expected to handhold the banks, directing them on the financial restructuring packages.
Such committees are mandated to be formed under the NPA Ordinance passed on May 5.
The government has hinted that 50 top defaulters' cases may be forced to be resolved within the December 31, 2017, deadline, else they will automatically be referred to the insolvency process.
Canara Bank is an example where the management is waiting for these OCs to help it resolve the loans in top corporate accounts, which form close to 50% of the bank's total non-performing assets (NPAs).
NPAs are accounts where repayments are delayed beyond the stipulated time of 90 days.
Rakesh Sharma, chief executive officer and managing director, Canara Bank, said in an analyst concall last week, "We have SDR (strategic debt restructuring) exposure of around Rs 7,000 crore and S4A (scheme for sustainable structuring of stressed assets) of around Rs 4,000 crore. These accounts are now for various reasons stuck, not moving because the required mandate is not forthcoming."
"We have to see in next fortnight or within next two to three weeks, some operative guidelines will there, and we expect some resolution in top three, four accounts; we are expecting it may happen in next one or two quarters," Sharma told analysts.
Canara Bank reported gross non-performing assets of Rs 34,202 crore with the bank writing off Rs 5,545 crore of loans during 2016-17. The steel sector alone contributed about Rs 10,800 crore to the NPA pile.
RBI, through the external OCs, is expected to frame financial restructuring packages that can either have an insolvency exercise or deep restructuring programme.
The central bank has also relaxed the requirements under the Joint Lenders' Forum. If banks get 60% consensus by value and 50% consensus by number, they can go ahead with the restructuring as against the earlier requirement of 75% in value and 60% in number.
Canara Bank's stressed accounts, at various stages of restructuring, are of a very large size, most of which the lender says are operative assets.
"The main requirement is there should be a dilution of equity and clearing of the debt and should lead to sustainable debt, which can be serviceable. So because of growing economy and existing demand, we should be able to support these and we expect some resolution process," Sharma said.
...& ANALYSIS
- Such committees are mandated to be formed under the NPA Ordinance passed on May 5
- Top 50 defaulters’ cases may be forced to be resolved within the December 31, 2017, deadline
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Canara Bank is an example where the management is waiting for these OCs to help it resolve the loans in top corporate accounts, which form close to 50% of the bank's total non-performing assets (NPAs).
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