RBI comes up with fresh list of over 40 top loan defaulters

Reserve Bank of India (RBI) has drawn up a second list of big-time borrowers who have defaulted on bank loans that have now become non-performing assets for the lenders.

RBI had in June asked banks to initiate insolvency proceedings against 12 top defaulters with overdue loans of over Rs5,000 crore each, totaling around Rs1,75,000 crore.

Banks have already initiated proceedings against 11 of the 12 defaulters.

The central bank has now asked lenders, mostly state-run banks, to initiate proceedings under the Insolvency and Bankruptcy Code against the 40-odd defaulters within four months if they fail to resolve the issues by then.

RBI is reported to have sent separate list of defaulter companies where these banks have exposure.

Reports quoting sources at public sector banks said while the exact amount of defaults is not known, the total could add up to a third of all non-performing assets of banks.

The second list of defaulters circulated by the RBI is reported to include names of names of big players such as Videocon, Uttam Galva, Monnet Power and Uttam Galva etc.

Reports said Videocon alone has outstanding debt of Rs19,500 crore and that banks, led by the SBI, had ordered a forensic audit of Videocon Industries' financials with a view to restructure debt.

Bankers, however, were unwilling to take cuts of more than a 30-35 per cent on their exposure to resolve the bad loan problem.

Videocon, which had reported total outstanding debt of Rs47,500 crore at the end of December 2015, currently has total outstanding loans of around Rs43,000 crore. Roughly half of it comprises lonas from foreign lenders raised to fund its foray into oil exploration and mining.

The company has not announced its financials in the last two years.

Banks will now have to file cases against these 40-odd borrowers in the National Company Law Tribunal. Once the case is admitted the management is replaced by an insolvency resolution professional and the board of directors is dissolved.

Promoters wanting to sort out debt problems and get their company back on track may approach the court with their proposal to repay debt. If the lenders find none of the proposals acceptable the business would have to be liquidated within 270 days.

Meanwhile, the finance ministry has asked stakeholders who intend to pursue their insolvency cases to approach appropriate authority/court under the existing enactments, instead of approaching the Debt Recovery Tribunals (DRTs).

''It has come to notice of the ministry that writ petitions are being filed before some high courts stating that 'The Presidency Towns Insolvency Act, 1909' and 'The Provincial Insolvency Act, 1920' (enactments) have been repealed in view of enactment of the Insolvency and Bankruptcy Code, 2016 (Code). On this basis, the litigants are claiming that matters related to individual insolvency and bankruptcy should now be dealt under provisions of the code.

''In this regard, it is hereby clarified that Section 243 of the Code, which provides for repeal of said enactments, has not been notified till date and further, provisions related to insolvency resolution and bankruptcy for individuals and partnerships as contained in Part III of the Code are yet to be notified. Hence, it is advised that stakeholders who intend to pursue their insolvency cases may approach appropriate authority/court under the existing enactments, instead of approaching the Debt Recovery Tribunals,'' the finance ministry stated.