Boards of these companies will be dissolved and insolvency resolution professional will be appointed to chalk out revival path
The internal advisory committee (IAC) constituted by Reserve Bank of India (RBI) has shortlisted 12 large value accounts totalling about 25% of the current gross non-performing assets of the banking system for initiating insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC).
Though it refrained from naming the accounts, the central bank said it will include all accounts with a fund and non-fund based outstanding amount greater than Rs 5,000 crore with 60% or more classified as non-performing by banks as on March 31, 2016.
A senior bank official said, "Some of the accounts bankers said would be Alok Industries, Electrosteel. However they will have to check whether 60% of accounts have been declared as an NPA as on the specified date."
IAC in its meeting held on June 12, 2017, took the decision to make this recommendation.
By referring the accounts to IBC, the banks will have to dissolve the company boards in 15 days and set up an insolvency resolution professional who in consultation with the banks chalk out a revival path.
The committee comprising independent board members and senior bankers was formed to set up a glide path for resolution of the bad loans referred to it on March 31, 2016.
The IAC, in the meeting, focused on large stressed accounts which were classified partly or wholly as non-performing from amongst the top 500 exposures in the banking system.
RBI said in a release, "IAC also arrived at an objective, the non-discretionary criterion for referring accounts for resolution under IBC. In particular, the IAC recommended for IBC reference all accounts with fund and non-fund based outstanding amount greater than Rs 5,000 crore, with 60% or more classified as non-performing by banks as of March 31, 2016. The IAC noted that under the recommended criterion, 12 accounts totalling about 25 % of the current gross NPAs of the banking system would qualify for immediate reference under IBC."
For the NPAs which do not qualify under the above criteria, the committee has recommended that banks should finalise a resolution plan within six months. In cases where a viable resolution plan is not agreed upon within six months, banks should be required to file for insolvency proceedings under the IBC.
The RBI, based on the recommendations of the IAC, will issue directions to banks to file for insolvency proceedings under the IBC in respect of the identified accounts. Such cases will be accorded priority by the National Company Law Tribunal (NCLT).
The details of the resolution framework in regard to the other non-performing accounts will be released in the coming days. The circular on revised provisioning norms for cases accepted for resolution under the IBC is being issued separately. The bad loans are peaking in five specific sectors like steel, power, telecom, infrastructure and textile.
...& ANALYSIS
- Details of the resolution framework in regard to the other NPA accounts will be released in the coming days
- The IAC was formed to set up a glide path for resolution of the bad loans referred to it on March 31, 2016
- The RBI, based on the recommendations of the IAC, will issue directions to banks to file for insolvency proceedings under the IBC
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IAC in its meeting held on June 12, 2017, took the decision to make this recommendation.
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