Bankruptcy Board Pushes Banks, Resolution Professionals To Speed Up Insolvency Process

IBBI and MCA officials met bankers and resolution professionals asking them to speed up resolution of top 12 accounts.

A hammer and a gavel (Source: <a href="">awesomecontent / Freepik</a>)
A hammer and a gavel (Source: awesomecontent / Freepik)

Plagued by judicial delays in completing the resolution of large stressed accounts, government representatives and members of the Insolvency and Bankruptcy Board of India met with lenders and resolution professionals Monday. On the agenda was looking for ways to speed up final resolution plans for the twelve large corporate accounts referred for insolvency in June 2017. These accounts make up about a fourth of the over Rs 10 lakh crore in bad loans that banks are struggling to resolve.

Officials from the Ministry of Corporate Affairs asked bankers and resolution professionals to close resolution of these twelve large accounts at the earliest, said people familiar with the discussions.

While much of the delay is because of court proceedings, MCA officials asked banks to "make better arguments" to expedite the resolution plans, said a person familiar with the talks. Bankers were also advised to appeal to higher courts in order to speed up the decision making process.

The meeting came against the backdrop of continuing delays in resolution, which in turn means that banks are unable to unlock capital for fresh lending. The delays in resolution have also meant that the government has been forced to pump in more capital into state owned lenders.

Banks Running Out Of Patience?

Patience now seems to be running low.

In recent days, some banks have chosen to put their loan exposure to large unresolved accounts on the block. Last week, State Bank of India put on sale its total loans to Essar Steel Ltd. worth Rs 15,431 crore, as per information on its auction website. The minimum reserve price for the loans has been set at Rs 9,587 crore. The bank was hoping to recover Rs 11,313 crore via a sale of the company to Arcelor Mittal but the case is stuck at the National Company Law Tribunal.

On Monday, BloombergQuint reported that Central Bank of India is looking to sell its entire Rs 1,550 crore exposure to Bhushan Power & Steel Ltd. Central Bank is seeking Rs 714 crore on a full cash basis from potential buyer, according to a banker directly familiar with the matter. Bhushan Power & Steel is also one of the twelve large accounts and is pending final resolution.

Despite the delays, RBI Governor Shaktikanta Das, in a speech on Friday, said that significant progress has been made under the insolvency regime. According to Das, data available till Jan. 3, 2019 suggests that the resolution plans have been approved in 66 cases, involving around Rs 80,000 crore as resolution value to creditors.