RBI selects 12 accounts, accounting for 25% NPAs, for Insolvency and Bankruptcy code

The Reserve Bank of India on Tuesday identified 12 non-performing accounts or assets (NPAs), totalling 25 percent of India's gross NPAs, which can be immediately taken up under the Insolvency and Bankruptcy Code (IBC).

An Internal Advisory Committee (IAC) comprising majorly of central bank's independent board members held its first meeting on June 12 to consider cases under the new IBC that was passed last year to resolve bad loans through the legal route.

The IAC recommended IBC reference for all accounts with fund and non-fund based outstanding amount greater than Rs 5000 crore, with 60 percent or more classified as non-performing by banks as of March 31, 2016, RBI said on its website late on Tuesday.

The IAC, in the meeting, agreed to focus on large stressed accounts at this stage and accordingly, took up for consideration accounts, which were
classified partly or wholly as non-performing from amongst the top 500 exposures in the banking system.

Besides the 12 accounts, the banking regulator instructed banks to finalise a resolution plan for all other accounts 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," RBI added.

Some of the large stressed accounts that could be a part of the 12 are Essar Steel with Rs 44,000 crore stressed assets, Bhushan Power (Rs 35,000 crore), Bhushan Steel (Rs 35,000 crore), Alok Industries (Rs 24,000 crore) and Electrosteel Steels (Rs 10,000 crore), according to a CNBC-TV18 report.

On the committee's recommendations, RBI will accordingly issue directions to banks to file for insolvency proceedings under the IBC in respect of the identified accounts and such cases will be accorded priority by the National Company Law Tribunal (NCLT).

The details of the resolution framework in regard to the other NPAs will be released in the coming days.

Additionally, RBI will separately revise provisioning norms for the cases accepted under the IBC resolution.