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.