RBI deadline for banks to resolve Rs 3.8 lakh crore bad loans ends today

The six-month deadline set by RBI to finalise resolution plans for around 70 large stressed accounts worth over Rs 3.8 lakh crore comes to a close on Monday with banks making a last mile dash to avoid bankruptcy proceedings against these defaulters who are mostly in the power and highways sectors.

Bankers are of the view that the bankruptcy resolutions at the national company law tribunal (NCLT) so far have seen them taking large haircuts which in cases like Alok Industries was as high as 86 per cent.

The RBI circular asks banks to identify projects with even a day's default as stressed assets, and conclude resolution proceedings in 180 days.  The circular came into effect on March 1 and the 180-day deadline concludes on August 27.

If no resolution is reached by today, these accounts, which also include some telecom companies, will have to be referred to NCLT to initiate bankruptcy proceedings, the RBI had said.

Banks are trying to come up with resolution plan for these accounts as going to NCLT will mean large haircuts. In some of the stressed accounts, some lenders have already finalised resolution plans, bankers said.

It can be noted that almost three fourths of these Rs 3.8 lakh crore-worth stressed assets are power companies which had dragged the central bank to the Allahabad High Court where the matter is still pending.

That the matter is sub-judice also gives bankers some confidence that they may get some more time to resolve them out-of-court. SBI managing director Arijit Basu had said on Friday that about 7-8 power sector projects worth Rs 17,000 crore are expected to be resolved soon as lenders are nearing consensus on these.

"There are about 34 stressed power projects and the combined value of their outstanding loans is about Rs 1.74 lakh crore. We have looked at 13-14 accounts which would entail changes in management, investment etc. Out of these, 7-8 accounts we are looking at very closely to get some consensus among the banks," Basu said.

"A few banks have already sanctioned resolution plans for some cases and others are in the process of doing so," said an executive director of a state-run bank.