RBI picks top 12 loan defaulters for bankruptcy proceedings

The Reserve Bank of India (RBI) has identified 12 big defaulters for initiation of bankruptcy proceedings and these names will be made public soon, the finance ministry said on Wednesday.

The RBI yesterday said it has identified 12 large loan defaulters who account for 25 per cent of the total NPAs of about Rs10,00,000 crore in the banking sector and these will be referred to respective banks for filing insolvency proceedings.

Although the RBI didn't name any defaulter, bankers say borrowers such as Bhushan Steel, Essar Steel, Lanco, and Alok Textiles may be the first set of companies facing proceedings under stringent recovery laws.

These cases will be accorded priority by the National Company Law Tribunal (NCLT).

The finance ministry further said that NCLT was being strengthened to fast track bankruptcy proceedings under the Insolvency and Bankruptcy Code (IBC).

RBI also inter alia said it would be constituting a Committee comprising majorly of its independent board members to advise it in regard to the cases that may be considered for reference for resolution under the Insolvency and Bankruptcy Code, 2016 (IBC).

An internal advisory committee (IAC) constituted by the RBI held its first meeting on 12 June, at which it was agreed to focus on large stressed accounts at this stage. Accordingly, it took up for consideration the 12 accounts which were classified partly or wholly as non-performing from amongst the top 500 exposures in the banking system.

The IAC also arrived at an objective, 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 Rs5,000 crore, with 60 per cent or more classified as non-performing by banks as of 31 March 2016.

The IAC noted that under the recommended criterion, 12 accounts totaling about 25 per cent of the current gross NPAs of the banking system would qualify for immediate reference under IBC.

As regards the other non-performing accounts which do not qualify under the above criteria, the IAC 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 accordingly 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).

RBI said it will release details of the resolution framework in regard to the other non-performing accounts in the coming days.