Money & Banking

SBI arm plans independent unit for insolvency resolution

K Ram Kumar Mumbai | Updated on January 10, 2018


As head of many consortia, top bank wants to ring-fence investment banking, advisory services

As the leader of several lending consortia, State Bank of India, through its investment banking arm SBI Capital Markets, is looking at setting up a unit to house insolvency resolution professionals (IRPs), who will take charge of the problem accounts to ensure that a turnaround or liquidation happens in an orderly manner.

The move comes in the wake of bank consortia proceeding against some 60 large accounts under the Insolvency and Bankruptcy Code (IBC) to recover loans of about ₹4 lakh crore.

Varsha Purandare, MD and CEO, SBICAP, said that forming a subsidiary to undertake activities relating to corporate insolvency resolution is being considered to avoid any conflict of interest with the investment banking and advisory services.

Currently, SBICAP has five wholly-owned subsidiaries — SBICAP Securities, SBICAP Ventures, SBICAP (UK), SBICAP (Singapore), and SBICAP Trustee Company.

The IBC enjoins upon the IRP, who is appointed by the adjudicating authority (the National Company Law Tribunal), to preserve and protect the assets of the corporate debtor.

Role of IRPs

The IRP has to take immediate custody and control of all the assets of the corporate debtor, represent and act on its behalf with third parties, raise interim finance subject to the approval of the committee of creditors, maintain an updated list of claims, invite prospective lenders, investors, and any other persons to put forward resolution plans, and present all resolution plans to the committee of creditors.

India’s largest bank is seeking to leverage the syndication capabilities it has developed to arrange project and corporate finance and earn fee income.

The bank is also seeking to increase its advisory business with respect to mergers and acquisitions, infrastructure projects, and securitisation.

Published on September 13, 2017

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