I/II. http://indianexpress.com/article/business/banking-and-finance/rbi-identifies-12-mega-defaulters-for-insolvency-reserve-bank-of-india-4702973/
RBI identifies 12 mega defaulters for insolvency, their total NPA Rs 175,000 cr 25% of total NPA in these accounts with overdue above Rs 5,000 crore each. Written by George Mathew | Mumbai | Updated: June 14, 2017 7:36 am “The IAC noted that under the recommended criterion, 12 accounts adding up to about 25 per cent of the current gross NPAs of the banking system would qualify for immediate reference under IBC,” the RBI said on Tuesday The Reserve Bank of India (RBI) is moving to resolve the bad loan crisis with an Internal Advisory Committee (IAC) of the RBI having identified 12 accounts of corporate borrowers who owe over Rs 5,000 crore each — and overall involve an amount of close to Rs 175,000 crore — for insolvency proceedings under the newly enacted Insolvency and Bankruptcy Code 2016 (IBC). The RBI committee has recommended for IBC reference all accounts with fund and non-fund based outstanding amounts in excess of Rs 5,000 crore, with 60 per cent or more (Rs 3,000 crore or more) classified as non-performing by banks as on March 31, 2016. “The IAC noted that under the recommended criterion, 12 accounts adding up to about 25 per cent of the current gross NPAs of the banking system would qualify for immediate reference under IBC,” the RBI said on Tuesday. However, the central bank did not reveal the names of these 12 defaulters. The RBI list came a day after Union Finance Minister Arun Jaitley reviewed the performance of state-owned banks in New Delhi on Monday. With total NPAs or bad loans of banks now close to Rs 700,000 crore, the money of banks stuck in these 12 accounts is estimated to be around Rs 175,000 crore. “The IAC also arrived at an objective, non-discretionary criterion for referring accounts for resolution under IBC,” the RBI said. 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). Once referred to the NCLT, the resolution of the case in terms of either a sell-off of assets or revival or winding up will have to be completed within 180 days. The RBI is expected to release details of the resolution framework in regard to the other non-performing accounts soon. On June 12, the 12 accounts were identified by the IAC comprising mainly of the RBI’s independent board members. They considered accounts which were classified partly or wholly as non-performing from among the top 500 exposures in the banking system. “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 said. The government had issued an ordinance last month by amending the Banking Regulation Act to empower RBI to recover ballooning NPAs. The amendment empowers the RBI to ask banks to initiate insolvency resolution proceedings for bankruptcy code cases and recover bad loans. The RBI recently announced several steps, including the reconstitution of oversight committee (OC) and bigger role for credit rating agencies to bring down NPAs. It also sought information on the current status of large stressed assets from banks. The oversight committee so far comprised of two members. It has been constituted by the Indian Banks Association in consultation with the RBI. It then decided to reconstitute the OC and enlarge it to include more members so that the OC can constitute requisite benches to deal with the volume of cases referred to it. The RBI plans to expand the scope of cases to be referred to the OC beyond those under the Scheme for Sustainable Structuring of Stressed Assets (S4A) as required currently, it said. According to the RBI, the current guidelines on restructuring are under examination for such modifications as may be necessary. In order to prevent rating-shopping or any conflict of interest, the RBI is exploring the feasibility of rating assignments being determined by the RBI itself and paid for from a fund to be created out of contribution from banks and the RBI. The loan recovery exercise will require coordination with and cooperation from several stakeholders including banks, asset reconstruction companies, rating agencies and private equity firms. II. http://www.business-standard.com/article/finance/npa-problem-12-mega-defaulters-to-go-under-insolvency-says-rbi-117061301442_1.html NPA problem: RBI identifies 12 mega defaulters for insolvency The RBI will issue directives to banks on these large accounts Anup Roy & Abhijit Lele | Mumbai June 14, 2017 Last Updated at 08:54 IST The Reserve Bank of India (RBI) on Tuesday said its internal advisory committee (IAC) had identified 12 accounts that covered about 25 per cent of the banking system’s non-performing assets for immediate resolution under the Insolvency and Bankruptcy Code. The gross bad debt of the Indian banking system as of March was at Rs 7.11 lakh crore, which means the 12 accounts would be responsible for about Rs 1.78 lakh crore. The central bank did not give the names of the borrowers. The government has amended the RBI Act, giving powers to the central bank to direct banks to take punitive action against individual accounts under the Code. Earlier the central bank could give directions only on an industry basis. The process of appointing a professional to take over the management of a company and then come out with a solution to repay loans will take a long time and may not be a workable solution, say corporate lawyers. The process begins with the banks approaching the National Company Law Tribunal (NCLT) to appoint a professional to manage a company even as the existing board gets suspended. The professional gets 180 days to come up with a workable solution for the company so that it can repay its loans. This timeline can be extended by another 90 days. If the company fails to come up with a solution within the 270 days, a liquidator is appointed. Banks and workers will then have to submit their claims to the liquidator. “The difference between the new code and the Board of Industrial and Financial Reconstruction is that the former has stringent timelines. Meanwhile, a promoter can move the High Court on various grounds, thus delaying the process,” said RS Loona, managing partner, Alliance Corporate Lawyers. Another lawyer said it would be difficult to understand any company’s operations and business in 270 days and hence this may not be a workable solution for banks. Bankers said the banking industry had prepared the files of 70 such cases which fitted the profile of being considered for insolvency. “Once the RBI comes up with a structure, the industry will send these cases, in accordance with the fitment,” said a banking industry source. However, a top banker also said there was very little new in the RBI statement as against expectations of bankers. “Banks were ready to take the large NPA cases to the NCLT long ago. So, actually, lenders have lost a few months of precious time,” the banker said, adding, now that work had been set in motion, the bankruptcy proceedings should stay on course to complete the process within 180 days. graph According to bankers, getting seasoned and skilled bankruptcy professionals to handle big ticket cases is a challenge. Also, as this is a large asset sale, it would be a mammoth task to find bidders with deep pockets. An exercise on this scale is happening for the first time in India. According to the RBI, the IAC explored 500 top exposures of the banking system and recommended for bankruptcy proceedings “all accounts with fund and non-fund based outstanding amount greater than Rs 5,000 crore, with 60 per cent or more classified as non-performing by banks as of March 31, 2016”. But the 12 accounts were referred immediately under the Code. The central bank had earlier cautioned that stress was coming from a few sectors such as power, telecom, steel, textiles, and aviation. Union Finance Minister Arun Jaitley later said the number of highly stressed accounts would number 40-50. However, banks were not eager to highlight their problem of bad assets and needed RBI prodding to do so. Recently it transpired that private sector banks might have hidden a substantial portion of bad debts even after the RBI’s asset quality review. “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’s statement said. The RBI said on the recommendation of the IAC, the central bank would start issuing directions to banks to file for insolvency proceedings under the Code in respect of the accounts identified. “Such cases will be accorded priority by the National Company Law Tribunal (NCLT),” the RBI statement said. To deal with the stressed sectors, the RBI in the past had introduced a number of schemes. But most of them failed. However, under the Code, the banks have to come to a resolution in a time-bound manner. The decision of the resolution process can be challenged. “This is a commendable move, and is not discretionary as everything, including strategic debt restructuring and the scheme for sustainable structuring of stressed assets (S4A) cases, would be included in this. The important point is that lenders can now roll out the resolution process without any discrimination or fear of being questioned. It will also bring about completely different behaviour from borrowers. More importantly, the no-man’s land, in terms of legal provisions and regulations between all the three stakeholders — the lender, government and judiciary — has come down significantly,” said Ashvin Parekh of Ashvin Parekh Advisory Services LLP. What’s next With the RBI’s Internal Advisory Committee identifying 12 accounts for immediate proceedings under the Insolvency and Bankruptcy Code, these cases are now expected to get immediate priority by the National Company Law Tribunal. This is the process that will be followed: The banks will file for these 12 debtors’ insolvency with NCLT NCLT will approve or disapprove cases after hearing all stakeholders Creditors/debtors may appeal at National Company Law Appellate Tribunal After go-ahead from NCLT, insolvency process begins The time given for completing bankruptcy proceedings is 6 months Company appoints interim resolution professional for 1 month to begin insolvency process A meeting of the committee of creditors will be called by the interim resolution professional Company appoints final resolution professional to take forward proceedings Company to go for liquidation if insolvency procedure is not completed within 6 months -- Peace Is Doable -- You received this message because you are subscribed to the Google Groups "Green Youth Movement" group. To unsubscribe from this group and stop receiving emails from it, send an email to greenyouth+unsubscr...@googlegroups.com. 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