INSUBCONTINENT EXCLUSIVE:
The big bank clean-up may have entered the final phase with almost Rs 4 lakh crore worth of bad loans going to the resolution process under
the Insolvency Bankruptcy Code.
With the RBI’s 180-day deadline for resolution of stressed assets coming to an end, banks are now
expected to initiate debt resolution proceedings against defaulters.
Incidentally, the last ray of hope has also faded for India Inc, with
the Allahabad High Court refusing to provide any relief to power companies
Although Supreme Court is scheduled to take their plea on Tuesday, legal experts say no big relief is in sight
A Parliamentary standing committee on energy had even warned that the new norms will sound the death knell for power companies, which
collectively owe over Rs 5.6 lakh crore to domestic banks.
With Allahabad High Court now refusing to intervene in the RBI move, it is a
Catch-22 situation for banks
While they are free to initiate winding-up proceedings against defaulting companies, they will have to take big hair cuts in case they are
forced to put the assets under the block
Through a circular on February 12, the RBI tightened the NPA norms, even introducing a one-day default clause
Industry and banks have been opposing the new guidelines, saying that it is virtually impossible to find a resolution in 180 days
On ET NOW’s India Development Debate, banking experts and industry representatives discussed the big NPA deadlock in the light of the
Allahabad High Court verdict
Here are the key takeaways:
PANEL VIEWSS MUNDRAFORMER DEPUTY GOVERNOR, RBI
As far as banks are concerned, this is not an event which was
Many of these accounts were already under stress
On the part of banks, there have been provisioning
There is a large economic interest which is locked in these projects
What really concerns me is the positioning of NCLT
Solution is not always the resolution
There is a need for all the stakeholders to review the situation
The process of NCLT itself is a kind of limbo.
ALOK DHIRMANAGING PARTNER, DHIR DHIR ASSOCIATES
In so far as power and infra cases are
concerned, we have to look differently
Issue with power is more macro in nature
Not commercial, but policy dependent in nature
We have to make a policy which is responsive
We have currently 12 benches of NCLT, which have large workload in Delhi, Bombay, and Calcutta
We have to look at these cases because of 180-day deadlines with a perspective of how to salvage them
We have to protect stakeholders.
CYRIL SHROFFMANAGING PARTNER, CYRIL AMARCHAND MANGALDASLooking at the broader footing of infrastructure,
many projects have concession agreements
The financing is typically of 10-12 years, and at the end, you have to refinance
Infra sector has special issues
Bulk of the power sector will go into liquidation
The nature of power sector is different
I think there is going to be a deep haircut
I don’t think RBI will change its stand
I don't think the 270-day process is going.
PRATIP CHAUDHURIFORMER CHAIRMAN, SBI
They have a genuine case but I don’t know how far they
How much they would turn around is a big question
Poor financing of discoms has led to their undoing
It’s not internationally traded
Where do you sell powerRs You can’t hold and store it
You have to go to the discoms
Discoms are not issuing power purchasing agreements
The NCLT system should be flexible
We should have more NCLT benches.
MYTHILI BHUSNURMATHCONSULTING EDITOR, ET NOW
High Court has given a small window of opportunity
It would seem that banks have little option but to refer power sector NPAs to NCLT
RBI circular has a generic approach
NCLT, as it stands today, the number of benches is inadequate
Most don’t have basic office infrastructure
Amendments to IBC allowed promoters of small corporates provided they are not willful defaulters to bid
Large corporates were not allowed for political backlash
We need to show a little bit of pragmatism.
