Finance ministry asks banks to prevent defaulters from buying stressed assets

New Delhi: To ensure success of bankruptcy process under the Insolvency and Bankruptcy Code (IBC), the finance ministry has asked banks to be vigilant to ensure that wilful defaulters are prevented from buying same stressed assets again, officials said.

As many as 12 accounts each having more than Rs 5,000 crore of outstanding loans and accounting for 25 per cent of total NPAs (non-performing assets) of banks are being under the Insolvency and Bankruptcy Code process. The total outstanding of these accounts taken together is Rs 1.75 trillion.

Besides, banks are in the process of taking other large NPAs accounts to the National Company Law Tribunal (NCLT) under the IBC. It has been brought to the notice of the finance ministry that some of the wilful defaulters are making bid to buy assets of those cases which have been referred under IBC, a senior official said.

The resolution is crucial to the entire banking sector and therefore banks have been advised to be vigilant so that wilful defaulters do not get benefits of the process, the official said, adding that banks have to be very conscious of this fact that such defaulters should not find way to get into system again.

IBC has defined time-frame for the resolution and there is 14-day time period for admission or rejection of a case by the NCLT. After a case is accepted by NCLT, the creditor would get 30 days to hire insolvency practitioners and then the entire process to be completed in 180 days which will look at various possibilities including revival of projects or liquidation.

The Reserve Bank of India (RBI) has been equipped with powers to specify one or more authorities to advise banks for dealing with the problem of NPAs which, as per the ordinance, “have reached unacceptably high levels and urgent measures are required for their resolution”.

NPAs of public sector banks have increased to Rs 7.33 trillion as of June 2017, from Rs2.78 trillion in March 2015.