RBI identifies 12 accounts with 25% of total NPAs for resolution

In a bid to enforce credit discipline, the Reserve Bank of India (RBI) has identified 12 accounts responsible for about 25 per cent of the banking system’s non-performing assets (NPAs) for immediate resolution. The central bank said on Tuesday that its internal advisory committee (IAC) would carry out the resolution under the Insolvency and Bankruptcy Code.

The Indian banking system’s gross bad debt was Rs 7.11 lakh crore in March, so the 12 accounts would mean a figure in the region of Rs 1.78 lakh crore. The RBI has not disclosed the 12 names.

This action has been made possible the amendment in the RBI Act made recently by the government. This has empowered the RBI to instruct banks to take punitive action against individual accounts. The earlier regime had it that it could direct banks on the industry basis.

Now, a professional could be appointed to take over the management of a company. First, the bank approaches the National Company Law Tribunal (NCLT) for such an appointment. The professional is mandated to present a solution within 180 days, a timeline that is extendable by another 90 days. If the solution is still found to be elusive, a liquidator is appointed.

At any rate, the evergreening of corporate debt may stop, but this won’t be easy. For promoter may move high courts. Further, bankers are reportedly not very happy with the pace the RBI is moving. The banking industry has reportedly prepared the files of 70 insolvency cases.

As regards the other non-performing accounts, “the IAC recommended that banks should finalize a resolution plan within six months. In cases where a viable resolution plan is not agreed upon within six months, banks should be required to file for insolvency proceedings under the IBC,” an RBI statement said.