RBI deadline exceeded, 20 new NPA accounts go to NCLT

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Mumbai: Like the deadline set by the Reserve Bank of India (RBI) For the resolution of troubled assets completed on Monday, lenders decided to refer 20 of at least 32 NPA accounts to bankruptcy courts, according to two bankers with knowledge of the matter. For the remaining 12 NPA accounts, lenders will restructure debt or initiate a sale process, the bankers said on condition of anonymity.

February 12, RBI had set a deadline of 180 days from March 1 to solve the defaults of large companies, failing which the banks must submit these cases to an insolvency procedure.

Of the 20 new accounts that will be referred to the National Company Law Tribunal (NCLT), a majority, including Essar Power, Korba West Power Co. Ltd, Jindal India Thermal Ltd and Sravant Energy Pvt. Ltd—are energy projects. The list also includes metal companies, including BMM Ispat Ltd, ISMT Ltd, BRG Iron and Steel and Splendid Metal Products Ltd. Reliance Naval is also among the companies that will be sent to bankruptcy courts.

The lenders have however decided to restructure the outstanding debt of Videocon Oil Ventures Ltd, GMR Rajahmundry Ltd and Jaiprakash Power Ventures Ltd.

The banks have received offers from Edelweiss Asset Reconstruction Co. to acquire two accounts: Coastal Energen Pvt. Ltd and GTL Infrastructure Ltd. Edelweiss Asset has made an offer 3,200 crores for Coastel Energen and 2,400 crore for GTL Infra. The asset reconstruction company is also exploring the possibility of partnering with foreign lenders to bid for these assets.

According to one of the two bankers mentioned above, the lenders have decided to sell Prayagraj Power Generation Company to Tata Group and Resurgent Power Ventures and SKS Power Generation (Chhattisgarh) Ltd, backed by ICICI Venture, to Singapore-based Agritrade Resources.

The lenders have agreed to a single settlement in the case of GMR Chhattisgarh Energy Ltd. A Bloomberg report said on Monday Adani Power Ltd seeks to acquire 1,370 megawatt GMR Chhattisgarh Energy. The deal is expected to be announced in the coming weeks after the lenders give formal approval, according to the report.

Emails and messages sent to the majority of businesses have not elicited any response. Sravanti Energy declined to comment as the matter is under judicial review.

The central bank, by its circular of February 12, asked banks to draw up resolution plans for accounts in default within 180 days in cases where the exposure is greater than 2,000 crore. The central bank has also introduced the concept of one-day default, under which banks must identify incipient stress when repayments are even one day late.

Last year, lenders referred a total of 40 large corporate accounts worth 3,500 billion to NCLT for the opening of insolvency proceedings.

Lenders such as the State Bank of India believe that admitting these accounts to NCLT will have no further impact on the bank’s provisioning requirement.

“The August 27 deadline would not have a significant impact on the provisioning requirements as most of them have already been classified as bad debts. There will be no accelerated provisions for these accounts since the circular of February 12 does not mention it,” SBI Chairman Rajnish Kumar said.

The Allahabad High Court on Monday refused to grant interim relief to power companies against the RBI circular. As a result, several power companies are now subject to referral to the NCLT. The High Court had previously ordered the lenders to avoid action against these power producers. However, companies have the possibility to challenge the judgment of the High Court before the Supreme Court.

“The resolution process will take its own course, judgment makes no difference,” said Rajkiran Rao, Managing Director and Chief Executive Officer, Union Bank of India. “The issue of how many accounts will go to NCLT will be discussed because we still have 15 days to decide (to take them to NCLT).”

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