The government expects bad loan recoveries to exceed Rs 1.80 lakh crore target for the current fiscal year, in view of new insolvency and bankruptcy law, an official said. According to a senior official of the Finance Ministry, some big accounts are in the process of getting resolved while some more are lined up for resolution under the Insolvency and Bankruptcy Code (IBC).
Citing some of the ongoing resolution of Essar Steel and Bhushan Power and Steel Ltd, the official said, "Going by the success rate, we hope that the recovery would exceed our own target of Rs 1.80 lakh crore through the IBC and other means.”
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Banks hopes to write back more than Rs 1 lakh crore alone from the resolution of 12 NPA cases referred to insolvency proceedings by the RBI in its first list.
Banks recovered Rs 36,551 crore in the first quarter of 2018-19. During 2017-18, banks recovered Rs 74,562 crore.
Satisfied with the progress of IBC, Finance Minister Arun Jaitley had said "now people have become broadly aware that the rules of the game in India have changed. The banks won’t chase you anymore, you will have to chase them."
Recoveries have picked up as a result, he had said, recoveries are not just because resolutions have taken place in the NCLT, but they have also picked up because of fear that if they cross redline they will be condemned to IBC process.
"The unintended consequence was that potential defaulters started realising that the moment you cross the redline, at least you will go out, and never get back. And if you have seen the last quarter or two, potential defaulters are begging, borrowing and stealing and paying back. And that’s why the banks have started getting monies even outside the NCLT system from potential defaulters not wanting to cross the redline," the finance minister had said.
Recoveries of nearly 86 per cent of the Rs 49,000 crore loan are expected by the lenders in case of Essar Steel.
ArcelorMittal has agreed to pay a total of Rs 50,000 crore, including a Rs 8,000 crore capital infusion, to acquire the firm.
RBI's internal advisory committee (IAC) had identified 12 accounts in June last year, each having more than Rs 5,000 crore of outstanding loans and accounting for 25 per cent of total NPAs of banks.