Many state-owned banks in India are planning to sell their bad loans in a bid to shore up their balance sheets, amid concern that bankruptcy proceedings are taking too long to wind failed companies up and resolve “distressed” assets.
Banks are even planning to sell loans that currently face litigation in the National Company Law Tribunal (NCLT), in order to enter 2019-20 with fewer distressed assets on their books, Business Standard reports.
Bankers are impatient, saying many bankruptcy proceedings go beyond the 270-day timeline set under the Insolvency and Bankruptcy Code because of litigation.
The banks are keen to sell close to one trillion rupees worth distressed assets currently with the NCLT. They include Essar Steel, in which the main lenders are State Bank of India and Central Bank of India and the total exposure is 480 billion rupees (US$6.7 billion), plus Alok Industries, where the main lender is IDBI Bank and the total exposure is around 290 billion rupees ($4.07 billion).
The other prominent bad loans that may be sold include ABG Shipyard, which owes 69 billion rupees ($968 million) to Dena Bank; Jaiswal Neco, which owes 39 billion rupees ($547 million) to IDBI Bank; Visa Steel, which owes 36 billion rupees ($505 million) to Bank of India; Dighi Port, which owes 27 billion rupees ($379 million) to Bank of India; and Moser Baer, which owes 23 billion rupees ($322.7 million) to Punjab National Bank.
Many other lenders are closely watching the time taken by the National Company Law Tribunal to dispose of their cases. Banks that have made provisioning for delays in the NCLT are willing to wait, but others want quicker resolutions.