Wednesday, June 28, 2017

SBI takes 3 of the 12 NPAs to bankruptcy court for resolution

On June 13, the RBI had identified 12 top large loan accounts to be immediately referred to the NCLT under the Insolvency and Bankruptcy Code.

Mumbai, June 27: State Bank of India (SBI), country’s largest lender, has referred cases of three of the 12 NPAs to the National Company Law Tribunal (NCLT) after the Reserve Bank of India’s direction to refer them under the Insolvency and Bankruptcy Code.

“Whatever has been asked for, we are doing in full force. I think 15 days’ time is over today, so the three accounts that were supposed to be taken within 15 days have been taken. In respect of the other three accounts for which we have time till, I think up to 15th of the (next) month, we will take them by that time, maybe a little earlier as well,” Arundhati Bhattacharya, Chairman of SBI, told reporters after the bank’s annual general meeting.

On June 13, the RBI had identified 12 top large loan accounts, accounting for 25 percent of the total bad loans in the banking system, to be immediately referred to the NCLT under the Insolvency and Bankruptcy Code (IBC). Those filed in the NCLT are likely to be among the companies such as Monnet Ispat Ltd, Alok Industries Ltd, Jyoti Structures, Amtek Auto and Essar Steel Ltd.

On Friday, the RBI further asked banks to make provisions (set aside buffer in case there is no recovery at all) of 50 percent towards the secured portion of the debt of each of the 12 accounts and 100 percent for the unsecured portion.

On the increased provisioning, Bhattacharya said, “… In all of these accounts we have pretty large provisions. So yes, we have to make a little more but it should not very badly impact the numbers.”  She added that in case a new buyer bids to buy one of the loans, the declared provisions would reduce the value of the asset.

“Only problem is that when you already make so much of provision and if there is somebody coming in order to take over that account, they will immediately take that as the lowest level of write off or hair-cut. So to that extent, we may have realised better value if we have not exactly pin pointed the amount of provisioning that we were making,” the SBI chief said. However, if there is a revival in the asset, the provisions can be written back and added to the profits of the bank.

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