HYDERABAD/MUMBAI: Banks will have to initiate bankruptcy proceedings against dozens of corporate defaulters next week as the six-month deadline set by the RBI on February 12 ends on Monday. The action will be required where the lenders have been unsuccessful in achieving resolution.
The total value of loans in these 60-odd accounts, which are already classified as non-performing assets (NPAs), is expected to be around Rs 3.5 lakh crore.
But even as the 180-day deadline looms, SBI is racing against time to resolve 11 default cases with loans worth Rs 62,000 crore that are part of the 60 accounts. “Of these, four have been referred to the National Company Law Tribunal (NCLT). For the remaining, it (process) is at various stages of approval with various lenders and we are trying to complete it next week. If it is not completed, the only option left will be referring it to the NCLT,” said SBI chairman Rajnish Kumar. He was speaking to reporters during a visit to Hyderabad.
A circular issued by the RBI on February 12 has had a twofold impact on banks. The first-round effects of the new regulation were seen in bank results for the quarter ended March 2018. Since the RBI had scrapped all loan-restructuring schemes, total slippages during the fourth quarter shot up to Rs 2.42 lakh crore. As a result, the stock of NPAs rose by Rs 1.2 lakh crore to Rs 10.4 lakh crore despite write-offs and recoveries.
The RBI circular also said that in the case of large NPAs, worth over Rs 2,000 crore, banks must aim for a resolution within six months. If no resolution was possible, lenders will need to initiate bankruptcy proceedings against these companies in the NCLT. An analysis of bank NPAs by rating agency ICRA showed that 70 large accounts amounting to Rs 3.8 lakh crore of bank exposure would require resolution by September 1, 2018.
This is in addition to the 40 defaulting borrowers with loans of over Rs 4 lakh crore, which have been taken to the insolvency courts earlier this year following two lists of defaulters handed over to banks by the RBI. Lenders estimate that cases worth around Rs 3.5 lakh crore will remain unresolved. Besides this, the RBI circular issued earlier this year has directed lenders to chalk out a resolution plan for 34 stressed power plants worth Rs 2.5 lakh crore with a combined capacity of 39GW within 180 days from March 1.
Elaborating on the seven cases, the SBI chief said there are buyers for these assets. "The price discovery has happened through a transparent mechanism… technical evaluations are complete. So what remains is the documentation part and sanctions by all the lenders. Their board meetings are on different days and, in the next one week, the documentation will be done. In most of the cases, there is a buyer and these assets will be sold… The benchmark that has emerged is Rs 3 crore per MW," he added.
On lending activity, he said the corporate sector — which was stagnant — is expected to pick up this fiscal. "Lending is mostly on consumer loans like car loans, home loans, personal loans. SME is showing a good pickup. Corporate loans (are improving) also because now we have put our house in order…so we are looking at some good lending opportunities and I think this year the corporate lending will be revived. We see 10 per cent growth in advances," he added.
In the corporate sector, Kumar said cement, road, steel, auto and oil & gas sectors are showing growth. The bank is also recruiting around 8,000 clerical staff and 2,000 probationers this year. He pointed out that the total headcount of the bank is expected to be around 2.60 lakh by the end of this fiscal.
During the visit, he participated in various CSR initiatives of the bank. He announced a donation of Rs 50 lakh to Greater Hyderabad Municipal Corporation towards Swacch Bharat Mission, Rs 15 lakh to district hospital at King Koti for construction of public toilets and Rs 20 lakh to Friends of Tribal Society to support the education of underprivileged children. He also handed over loans worth Rs 17 crore under the Mudra scheme of the government.
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