In a significant development signaling a step forward in the Reserve Bank of India’s efforts to deal with the menace of bad loans, the central bank has identified 12 accounts of corporate borrowers with a combined debt of Rs 1,75,000 crore – approximately one-fourth of the total NPAs – for proceedings under the newly enacted Insolvency and Bankruptcy Code 2016 (IBC).
The Internal Advisory Committee (IAC), the central bank said, has arrived at an objective, non-discretionary criterion for referring accounts for resolution under the Insolvency and Bankruptcy Code (IBC).
“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, without divulging the names of the 12 borrowers whose accounts have been identified.
"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 RBI said in a statement.
The RBI, based on the recommendations of the committee, will now 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.
The banking sector is saddled with non-performing assets (NPAs) worth over Rs 8 lakh crore, of which Rs 6 lakh crore is with public sector banks (PSBs).