A major deadline in the process of resolving the country’s most pressing corporate and banking problem of NPAs, or bad loans, is ending on Monday with the RBI having set a six-month time frame for finalising resolution plans for around 70 large stressed accounts worth over Rs 3.8 lakh crore.
In a circular on restructuring bad loans issued in February, the Reserve Bank of India (RBI) had asked banks to identify projects with even a day’s default as stressed assets and conclude resolution proceedings in 180 days.
The RBI circular had directed banks to take loan accounts of Rs 2,000 crore and above, which remain unresolved for over 180 days starting from March 1, 2018, to the National Company Law Tribunal (NCLT) under the new Insolvency and Bankruptcy Code (IBC).
Domestic rating agency Icra has said in a recent report that these 70 large non-performing asset (NPA) accounts are mostly from the power, telecom and construction sectors.
According to banking sources, banks have been working overtime to finalise the resolution plans for these accounts so as to avoid going for bankruptcy proceedings in the NCLT.
The country’s largest lender, State Bank of India (SBI), is looking at recovering more than Rs 40,000 crore of its stressed assets in the current fiscal, an official said on Saturday.
State-run State Bank Of India (SBI) Deputy Managing Director (Stressed Assets Resolution Group) Pallav Mohapatra said, the SBI expects to make a recovery of more than Rs 40,000 crore in the current financial year, mostly through the IBC, while a smaller percentage would be recovered from other sources like sale of assets and one time settlement.
Bankers are hoping that the RBI will take a lenient view and not refer all the NPA accounts to NCLT immediately after Monday’s deadline expiry as the resolution process is already underway in some cases.
The power sector accounts for the major chunk of NPAs and according to RBI, the total outstanding loans of scheduled commercial banks to the sector, including renewable energy, stood at Rs 5.65 lakh crore as on March 2018.
A Parliamentary panel report has revealed that there are as many as 34 stressed electricity projects with a total capacity of over 40,000 MW.
Power producers had petitioned the government that RBI norms on resolving the NPAs issue were too rigid in view of the serious problems being faced by the industry in the way of coal shortage and the huge bill outstandings due from state distribution companies.
The Power Ministry had urged the RBI to extend the deadline by six months, but the central bank has rejected the extension request.
The Parliamentary Standing Committee on Energy in its report earlier this month noted that the new RBI guidelines on NPAs will only deepen the crisis of the electricity sector.