Govt will review the status of 52 large defaulters under IBC

New Delhi: The Ministry of Corporate Affairs is set to meet lenders on January 21 to review the progress in 52 cases under the Insolvency and Bankruptcy Code (IBC) that form bulk of the bad loans in the banking system, two sources in the banking industry said. These defaulters were part of the Reserve Bank of India's (RBI) list 1 and 2 and were admitted under IBC. Together, they account for 60 percent of bad loans in the banking system.

Only three cases resolved so far

Among the big defaulters, only three cases — Bhushan Steel Ltd, Monnet Ispat Ltd and Electrosteel Steel Ltd — have been resolved so far. The rest are still pending even though more than 540 days have passed since they were admitted by the National Company Law Tribunal (NCLT).

Slow resolution a problem

As last-minute litigations continued to delay the recovery of loans, the State Bank of India (SBI) recently put on sale its Rs 15,431 crore exposure to Essar Steel Ltd. Other lenders of the steelmaker, that includes HDFC Bank Ltd, Axis Bank Ltd, ICICI Bank Ltd and Federal Bank, have also already sold their exposure in the last few years, either in part or in full. Essar Steel defaulted on loans, worth more than Rs 49,000 crores, from at least two dozen banks led by SBI.

While addressing a gathering at the India Business Leaders' Award last week, SBI chairman Rajnish Kumar said that the bank's decision to sell Essar Steel's exposure was to avoid losses of Rs 17 crore on a single account per day. "There is time value of money and that explains SBI's decision to put on sale Essar Steel's exposure," he added. "While we are not fed up with the IBC, its success lies in the fact there is a quick resolution of cases," he said.

In several cases, including that of Amtek Auto, ABG Shipyard, Ruchi Soya and Adhunik Metalicks, bidders withdrew from the resolution process at the last stage.