RBI names 12 large NPA accounts for insolvency proceedings

Mumbai: Clamping down on bad loans, the RBI today identified 12 accounts for insolvency proceedings with each of them having over Rs 5,000 crore of outstanding loans, accounting for 25 per cent of total NPAs of banks.

The banking sector is saddled with non-performing assets (NPAs) of over Rs 8 lakh crore, of which Rs 6 lakh crore is with public sector banks (PSBs). These 12 accounts would qualify for immediate reference under the Insolvency and Bankruptcy Code (IBC), the RBI said.

The central bank, however, did not name the defaulters. The Reserve Bank had set up an Internal Advisory Committee (IAC), comprising a majority of its independent board members, to advise it with regard to the cases that may be considered for reference for resolution under the IBC.

The IAC, the apex bank said, arrived at an objective, non-discretionary criterion for referring accounts for resolution under the IBC. In particular, the IAC recommended for IBC reference of 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.

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

The Reserve Bank, based on the recommendations of the IAC, will accordingly be issuing 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)," it said. As regards other non-performing accounts, the IAC had
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 would be required to file for insolvency proceedings under the IBC. The Reserve Bank said the details of the resolution framework with regard to other non-performing accounts will be released in the coming days.

The IAC, in the meeting, had agreed to focus on large stressed accounts and accordingly took up for consideration the accounts which were classified partly or wholly as non-performing from amongst the top 500 exposures in the
banking system.

Last month, the Reserve Bank had outlined the steps taken and those on the anvil pursuant to the promulgation of the Banking Regulation (Amendment) Ordinance, 2017.

Yesterday, Finance Minister Arun Jaitley took stock of the finances of public sector banks as also the resolution of bad loans or NPAs, with heads of the lenders. Besides NPA resolution and bank finances, the meeting also featured the government's financial inclusion schemes.