Bid to begin insolvency proceedings against Essar, Bhushan, Electrosteel

Press Trust of India Mumbai | Updated on January 12, 2018 Published on June 22, 2017


Lenders led by the State Bank of India on Thursday decided to begin insolvency proceedings against Bhushan Steel, Essar Steel and Electrosteel Steels by referring them to the NCLT for recovery under the Insolvency and Bankruptcy Code (IBC).

The decision was taken at a marathon meeting chaired by SBI. While Bhushan Steel is in default of ₹44,478 crore to banks, Essar Steel owes ₹37,284 crore and Electrosteel Steels, ₹10,273.6 crore.

These three borrowers are among the 12 accounts identified by the Reserve Bank for immediate reference to the National Company Law Tribunal (NCLT). These 12 accounts alone constitute a quarter of the over-₹8 lakh-crore of NPAs.

Bankers, led by IDBI Bank, will be meeting tomorrow to decide on Bhushan Power & Steel, which has been in default of ₹ 37,248 crore.

The development couldn’t be immediately confirmed with these companies.

Besides these three accounts, the other stressed borrowers include Amtek Auto (₹14,074 crore), Alok Industries (₹ 22,075 crore), Monnet Ispat (₹12,115 crore) and Lanco Infra (₹44,364.6 crore).

Era Infra (₹10,065.4 crore), Jypaee Infratech (₹9,635 crore), ABG Shipyard (₹6,953 crore) and Jyoti Structures (₹5,165 crore) were also among the stressed accounts identified, according to reports.

“The meeting on these three companies was to finalise the application which banks will be filing to NCLT,” said a senior banker.

Lenders want all the bankers in the consortium to give their consent before registering the case with NCLT. Officials from these three companies were also present at the meetings, bankers said.

On Saturday, Lanco Infratech said the RBI has directed its lead banker IDBI Bank to initiate the insolvency procedure for the company.

Once a case is referred to NCLT, there is a 180-day time line to decide on a resolution, though 90 days can be given in addition. If a plan is not decided, then the company will go into liquidation.

The internal advisory committee of the RBI after its meeting on June 13 had recommended 12 accounts totalling about 25 per cent of the gross NPAs of the banking system for immediate reference under the IBC.

These 12 accounts referred by the RBI have an exposure of more than ₹5,000 crore each, with 60 per cent or more classified as bad loans by banks as of March 2016. The banking system’s total NPAs stand at over ₹8 lakh crore, of which ₹6 lakh crore are with public sector banks.

RBI oversight panel

Meanwhile, the Reserve Bank today expanded the oversight committee by appointing three more members to the high-level panel that will vet the process to resolve mounting bad loans bogging down the banking sector.

Former chief vigilance commissioner Pradeep Kumar will head the now five-member panel that will work through multiple benches, the RBI said in a statement.

The expansion follows promulgation of the Banking Regulation (Amendment) Ordinance 2017 last month. The ordinance had outlined the reconstitution of the Overseeing Committee (OC) with an expanded mandate.

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Published on June 22, 2017
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