Bankers Move Swiftly On Insolvency Cases

SBI calls for lenders meeting to discuss six large corporate cases that could be taken to the NCLT.

A fixed line telephone and a calculator sit next to a pair of spectacles (Photographer: Chris Ratcliffe/Bloomberg)  
A fixed line telephone and a calculator sit next to a pair of spectacles (Photographer: Chris Ratcliffe/Bloomberg)  

The State Bank of India has called meetings of joint lenders’ forums to discuss large corporate accounts for invoking the Insolvency and Bankruptcy Code, two days after India’s central bank identified 12 such cases.

The marathon meetings are slated for next week, four bankers aware of the matter told BloombergQuint requesting anonymity. India’s largest lender will discuss the 12 cases that the central bank has pointed out. These are Essar Steel Ltd., Bhushan Steel Ltd., Bhushan Power & Steel Ltd., Monnet Ispat & Energy Ltd., Jyoti Structures Ltd., Alok Industries Ltd., Amtek Auto Ltd., Electrosteel Steels Ltd., Lanco Infratech Ltd., Era Infra Engineering Ltd, ABG Shipyard Ltd and Jaypee Infratech Ltd., the people quoted above said.

According to a report released by Credit Suisse on June 2, the outstanding gross borrowings for some these companies are...

  • Bhushan Steel: Rs 44,885 crore.
  • Lanco Infratech: Rs 45,436 crore.
  • Alok Industries: Rs 22,919 crore.
  • Monnet Ispat: Rs 12,737 crore.
  • Era Infra: Rs 6,509 crore.
  • Electrosteel Steels: Rs 11,304 crore.
  • Jaypee Infratech: Rs 10,106 crore.

Various other reports and banking officials have estimated debt for other companies on the list:

  • Essar Steel: Rs 40,000-45,000 crore.
  • Amtek Auto: Rs 13,500 crore.
  • ABG Shipyard: Rs 16,000 crore.
  • Jyoti Structures: Rs 4,888 crore
  • No estimates were available for Bhushan Power.

Essar Steel, in an emailed statement, said the company has not received any notice from its lenders. Spokespersons at Era Infra, Bhushan Steel and Jaypee Infratech weren’t immediately available for comment. The rest did not respond to queries. SBI Chairman Arundhati Bhattacharya declined to comment on the story.

SBI is planning to take these cases to the National Companies Law Tribunal (NCLT) for insolvency proceedings within the next two to four weeks. Under the rules specified by RBI, banks have 30 days from the day of receiving the list to take the cases to the NCLT. The tribunal will then have to admit them in 14 days.

The Economic Times on Friday had first reported that SBI has called other bankers for JLF meetings next week to discuss the insolvency proceedings.

Bankers Move Swiftly On Insolvency Cases

The action from lenders comes after the Reserve Bank of India said that its independent advisory committee (IAC) has identified 12 cases for immediate action under the insolvency code. These 12 cases represent a fourth of the total gross non-performing assets (NPAs) of the banking sector.

The committee was formed after the government amended the Banking Regulation Act through an ordinance to give the central bank more powers in the resolution of stressed loans, which are currently at 17 percent of total advances.

The IAC chose these cases using a common criterion where the total bank exposure exceeded Rs 5,000 crore, and about 60 percent of loans have been classified as NPA as on March 31 last year. These cases will be accorded priority by the NCLT, the regulator had said in a statement on Tuesday.

(Updated version of the story first published on June 16 to add reactions from companies and lenders)