Mumbai, June 13: The RBI has trained its guns on a dozen bank accounts that are awash with bad loans for action under insolvency rules that could lead to the liquidation of the companies.
An internal committee of the Reserve Bank of India (RBI) has identified the 12 accounts that would be considered for resolution under Insolvency and Bankruptcy Code (IBC).
These accounts account for around 25 per cent of the gross non-performing assets (NPAs) of the banking system. Bad loans in the banking system are estimated at over Rs 8 lakh crore, meaning the NPAs in the 12 accounts are at over Rs 2 lakh crore.
The RBI had constituted an Internal Advisory Committee (IAC) comprising independent members of its board to advise it on cases that may come under the insolvency code.
This was part of an action plan of the central bank against bad loans under Banking Regulation (Amendment) Ordinance, 2017.
According to the ordinance, the RBI can issue directions to banks to initiate insolvency proceedings against defaulters.
In a late evening announcement, the RBI said that the advisory committee, which held its first meeting on June 12, had agreed to focus on large stressed accounts and accordingly took up for consideration the accounts which were classified partly or wholly as non-performing from among the top 500 exposures in the banking system.
It added that the committee arrived at an objective, non-discretionary criterion for referring the accounts for resolution under the insolvency code.
The committee decided to act against the companies which owed Rs 5,000 crore to banks, with 60 per cent of this sum classified as non-performing as of March 31.
The apex bank did not disclose the identity of the accounts, but said it would issue directions to banks to file for insolvency proceedings against them.
Such cases will be accorded priority by the National Company Law Tribunal (NCLT), the adjudicating authority on cases under the insolvency code.
The code has set a deadline of 180 days to come to a decision on the defaulters, with the term extended by another three months if liquidity is not an option and the lenders agree on a revival plan.
Finance minister Arun Jaitley yesterday said that more than 80 cases of bad loans had been referred to the tribunal, out of which 18 were referred by the creditors.
The Reserve Bank added that with regard to those NPAs which will not be covered under the criteria announced today, banks will have to finalise a resolution plan within six months. In cases where a viable resolution plan is not agreed upon within six months, the lenders could file for proceedings under the insolvency code.
The Reserve Bank is looking into a request to extend the NPA classification period from the current 90-day window to help small and medium units.
"Some people have made representation to the finance ministry for raising the NPA classification period beyond existing 90 days. This issue is under consideration. It is being examined by the RBI," said minister of state for finance Arjun Ram Meghwal.
He, however, did not disclose the details of the representation.
At present, an account turns into a non-performing asset (NPA) or a bad loan if it is not serviced for 90 days.
In case of small businesses and SMEs, payments come usually late. Once they miss the 90-day period and fall into the non-performing asset category, their credit line is cut.