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Recovery of debt in India banks



Recovery of debt in India banks

The Reserve Bank of India (RBI) said 12 accounts representing about 25% of the gross bad loans in the banking system would be eligible for immediate reference for bankruptcy proceedings. Indian banks are sitting on a stressed asset pile of close to Rs 10 trillion; of this, gross bad loans account for Rs 7.7 trillion and the rest are restructured loans.

The list of top 12 companies are given below:

Financials of 12 Companies that are likely to be in the RBI’s 12 big NPA Accounts referred for insolvency

Company Year Net worth Gross debt Total assets Total income Net Profit
Essar Steel FY16 8617 29488 62700 14379 -5800
Lanco Infratech FY17 -2074 43502 45065 7510 -2255
Bhushan Steel FY17* 4658 42356 48327 13778 -3121
Bhushan Power# NA NA 37248 NA NA NA
Alok Inds FY17 1703 23443 25432 8988 -3072
Monnet lspat FY17 -1602 10333 8902 1275 -1870
Era Infra Engg FY17 -1981 10129 8377 1286 -1414
ABG Shipyard FY16 -2822 8742 5926 38 -2730
Jaypee Infratech FY17 5921 8606 14871 1164 -989
Electrosteel Steel FY17 -568 7505 6946 2635 -1463
Amtek Auto FY17 2467 3928 14404 2719 -3253
Jyoti Structures FY17 -1700 3387 1885 916 -1426
Total 12620 228668 242834 54687 -27394

Figures in Rs. Crore; *Net Worth, gross debt  and total assets are for FY16 ;# data from media report source: CapitalinePlus

Indian banks have initiated a big crackdown on bad loans armed with the Insolvency and bankruptcy code (IBC). The attack on the non-performing assets (NPAs) began first in 2015 when the Reserve Bank of India (RBI) stipulated norms for early recognition of stressed assets in the banking sector. Subsequently, the RBI came with a March 2017 deadline for banks to clean-up their balance sheets by disclosing all the hidden NPAs. While this exercise pushed banks to account for a big chunk of impaired assets, the recovery of money still remained a major concern for the sector and the policymakers.

But, the passage of bankruptcy code came with the promise of a major change in banks’ NPA battle. Under this, if the majority lenders agree, banks can take companies to National Company Law Tribunal (NCLT) with a request for time bound resolution plan. If the resolution process fails within a maximum of 270 days, insolvency process is initiated against the concerned company. Under a mutually agreed framework between banks and other stakeholders in the firm, the proceeds from the liquidation process will be shared.