Only 12 Accounts Responsible For Rs 1.78 Lakh Crore Of Bad Loans : RBI

The Logical Indian Crew

June 14th, 2017 / 12:27 PM

Image Credit: India spot news

On Tuesday, 13 June, the Reserve Bank of India (RBI) revealed that as few as 12 accounts are responsible for a quarter of the bad loans in the country’s banking system.

The discovery was made by the central bank’s internal advisory committee (IAC), which has recommended these accounts for immediate resolution under the Insolvency and Bankruptcy Code, 2016 (IBC).

The RBI has not yet disclosed the names of these accounts.

The official RBI press release can be read here.


India’s bad loans problem

In the last three years, the RBI has been struggling to resolve the bad loan problem. In May 2016, former RBI Governor Raghuram Rajan initiated the Asset Quality Review (AQR) through which the RBI had asked the banks to report stressed loans or even non-performing ones (more details here).

Some of the findings of the AQR were:

  1. A watchlist of potentially bad loans were unearthed.
  2. Raghuram Rajan confessed that the earnings of state-run banks do not look “pretty”.
  3. The findings of the AQR caused the public sector banks market capitalisation to drop due to the poor numbers.
  4. The RBI also asked banks to clear their balance sheets by 2017.

On Tuesday, it was revealed that only 12 accounts are responsible for about 25% of these bad loans. The gross bad debt that plagues India’s banking system as of March 2017 was at Rs 7.11 lakh crore, according to Business Standard. This means that the 12 accounts would be responsible for about Rs 1.78 lakh crore.


RBI granted more powers to tackle bad loans

On 3 May, the Cabinet amended the Banking Regulation Act, 1949 to address India’s problem with bad loans and nonperforming assets (NPAs). The Cabinet’s amendment put in place a scheme to resolve stressed assets in the banking system by giving the RBI a broad range of powers to tackle bad loans (more here).

At its first meeting on Monday, the IAC panel – which is mainly comprised of the RBI’s independent board members – discussed the top 500 stressed accounts of the banking system that could be referred for resolution under the Insolvency and Bankruptcy Code (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),” Livemint quoted the central bank as saying.

The NCLT is the arbitration authority for cases filed under the IBC. So far, 81 cases of bad loans have been referred to NCLT, Finance Minister Arun Jaitley said on Monday, 12 June, after meeting bank chiefs. About 18 were referred for bankruptcy by their creditors.

For those accounts that don’t meet the criteria set by the advisory panel, the IAC suggested that banks should finalise 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 details of the resolution framework for these other non-performing accounts are expected to be released in the coming days.

 


Also read:

 

  1. Rs 9.34 Trillion Bad Loans: President Approves Cabinet Proposal To Enable RBI To Tackle Them
  2. Bad Loans Rise By 135 Percent To Rs 614,872 Crore In Last Two Years
  3. Govt. To Give Money To Banks To Make Up For Bad Loans, Know About It

 


Contributors

Written by :

Edited by :

Share your thoughts..

Related Stories

Bad Loans By Wilful Defaulters Worth Rs 516 Crore Written Off In First Half Of FY18

Mehul Choksi, One Of The Two Accused In PNB Scam, Claims Innocence In Open Letter To Employees

“Won’t Leave India”: Rotomac Owner Who Defaulted On Over Rs 800 Crore Loan

As Bad Loans Pile Up, SBI Registers Its First Quarterly Loss In 17 Years

India’s NPA Has Crossed Rs 8.5 Lakh Crore

write-off

Public Sector Banks Write Off Rs 55,356 Crore In First Six Months Of Financial Year 2017-2018 In A Move To Clean Balance Sheet

Latest on The Logical Indian

My Story

My Story: I Saw A Man Lying In A Pool Of Blood Surrounded By On-Lookers & I Decided To Do Something About It

My Story

My Story: I Was In A Shared Cab When A Little Girl Asked Why The Muslim Man Is Wearing A Cap

Opinion

The Closed Gates Of Sabarimala

Get Inspired

TN: Schoolgirls Collect And Send 20,000 Plastic Wrappers Back To Their Respective Manufacturers

News

UP: After Meeting The Forest Minister, Two Adivasi Women Fighting For Forest Rights Gone Untraceable

Sponsored

Today’s Youth, Leaders Of Tomorrow: ICICI Academy For Skills

x

Stories that deserve attention, delivered to your inbox!

Handpicked, newsworthy stories which deserve the attention of a rational generation.