RBI identifies 12 accounts with 25% of gross bad loans for bankruptcy proceedings

Mumbai, Jun 14 (KNN) The Reserve Bank of India (RBI) has identified 12 accounts representing about 25% of the gross bad loans in the banking system that would be eligible for immediate reference for bankruptcy proceedings.

An internal panel of the central bank has suggested that accounts with outstanding amounts of more than Rs 5,000 crore, of which at least 60% was classified as non-performing by banks as of March 31, 2016, can be referred for bankruptcy proceedings.

The RBI did not disclose the names of the accounts. The accounts were shortlisted by an internal advisory committee (IAC), which mainly comprises the central bank’s independent board members.

Under a May 5 ordinance amending the Banking Regulation Act, the central bank has the powers to suggest to, and even compel, banks to invoke proceedings against defaulters.

At its first meeting on Monday, the panel discussed the top 500 stressed accounts of the banking system that could be referred for resolution under the Insolvency and Bankruptcy Code, 2016 (IBC).

“The Reserve Bank, based on the recommendations of the IAC, will accordingly be issuing directions to banks to file for insolvency proceedings under the IBC in respect of the identified accounts. Such cases will be accorded priority by the National Company Law Tribunal (NCLT),” the central bank said.

The NCLT is the arbitration authority for cases filed under IBC.

The details of the resolution framework in regard to the other non-performing accounts will be released in the coming days.

The RBI also said that it would detail revised provisioning norms for cases accepted under the bankruptcy code.

For accounts that don’t meet the criterion set by the advisory panel, the IAC suggested that banks should finalize a resolution plan within six months. In cases where a viable plan is not agreed within six months, banks have to file for insolvency proceedings, the RBI statement said.

The details of the resolution framework for these other non-performing accounts will be released in the coming days, it said.