State Bank of India (SBI) Chairperson Arundhati Bhattacharya has called for a stronger ecosystem for faster implementation of the new Insolvency and Bankruptcy Code (IBC) to resolve cases of defaults. Addressing the media here on Tuesday, she said that the country’s largest lender was not rushing to settle its stressed assets due to lack of a proper network.
Bhattacharya said that the banking sector has got the law it wanted but banks need a framework for the orderly resolution of stressed accounts. She also said that the implementation of the new code will take some time.
"The banking sector has in one voice asked for the Bankruptcy Code. As the country matures and evolves, it is necessary to have a judicial framework for orderly resolutions of assets. We cannot have makeshift structures that we were having earlier. So, we have been asking for a bankruptcy law and that has come. Now, the reason why we have not been rushing towards this is because with the law also you need to set up the ecosystem," she said.
Bhattacharya noted that first of all, the bench of National Company Law Tribunal (NCLT) has to be created, people have to be deputed on the bench and next, one needs to create an information utility, which has not come yet. She also cited the requirement of certified and registered resolution professionals to go with the resolution process.
"So, it has taken a little time for the law to be passed, rules to be notified and all the infrastructure to be created. Now, the ecosystem has begun getting created...it has been created, but not fully. And that is why we have seen that slowly the cases have been going on," she said.
The SBI Chief said that all the 12 stressed accounts, which were identified by the Reserve Bank of India, were receiving its attention and it hoped to see fast resolution for the settlement of dues through the IBC. Last month, the RBI had identified 12 large accounts with exposure of more than Rs 5,000 crore and more than 60 per cent of which is recognised as NPAs. Banks have to refer to the IBC for these accounts.
"All of the stressed accounts are receiving our attention. As and when it will come up in front of the NCLT, we will be making our representations. And we hope that these resolutions will happen as fast as it currently laid out in the law," she said.
Bhattacharya said that the amount of provisioning that needs to be made on the 12 stressed accounts will ‘slightly’ be above of what the bank would have made in any case. "It will obviously hit the bottomline (of SBI), but not to that extent," she said.
The new bankruptcy procedure, which was introduced last month by the RBI, lays down timeline to recover from defaulters. The law also empowers lenders to initiate insolvency proceedings against the borrowers. If no resolution is arrived at within 180 to 270 days, it allows the lenders to auction off the assets of borrowers to recover dues.
The NPAs of state-run banks at the end of last September rose to Rs 6.3 lakh crore as compared to Rs 5.5 lakh crore at the end of June 2016.
With IANS Inputs