RBI says 12 accounts with 25% of bank bad loans identified for insolvency

The Reserve Bank of India (RBI) on Tuesday identified 12 accounts each having more than Rs5,000 crore of outstanding loans and accounting for 25% of total bad loans of banks for immediate referral for resolution under the insolvency and bankruptcy code.

Without naming the defaulters, RBI said the banks will be asked to initiate insolvency proceedings to recover the dues.

The banking sector is saddled with non-performing assets (NPAs) worth over Rs8 trillion, of which Rs6 trillion is with public sector banks.

The Internal Advisory Committee, RBI said, has arrived at an objective, non-discretionary criterion for referring accounts for resolution under the insolvency and bankruptcy code (IBC). “In particular, the IAC recommended for IBC reference of all accounts with fund and non-fund based outstanding amount greater than Rs5,000 crore, with 60% or more classified as non-performing by banks as of 31 March 2016,” RBI said in a statement.

The IAC noted that under the recommended criterion, 12 accounts with about 25% of the current gross NPAs of the banking sector would qualify for immediate reference under the insolvency and bankruptcy code, it said.

The central bank, based on the recommendations of the IAC, will accordingly be issuing directions to banks to file for insolvency proceedings under the insolvency and bankruptcy code in the identified accounts. Such cases will be accorded priority by the National Company Law Tribunal (NCLT).