Page 8 - Banking Finance September 2018

BANK UPDATE

One day Default Clause Creditors recover Rs. Rs 49,783 crore under IBC code
Creditors have recovered Rs 49,783 crore, around 56% of their registered claims,
for Banks too rigourous
from 32 stressed companies where insolvency reso-
Former deputy governor SS Mundra lution plans were approved by the National Com-
has sug- pany Law Tribunal (NCLT) by the end of June,
gested showed data compiled by the Insolvency and Bank-
that the ruptcy Board of India.
RBI take According to the industry sources despite the av-
a relook erage 44 per cent haircut that the creditors took,
at its Insolvency and Bankruptcy Code (IBC) has performed much better than the earlier
February 12 order mandating that system where the recovery process was strenuous and yielded too little. Of
banks treat delay in payments by course, the numbers are good mainly because of Bhushan Steel, which accounted
borrowers even by a day as default for close to 64 per cent of the total claims by these 32 firms and an equal amount
and begin work on how to prevent in recovery.
that becoming a bad loan. Financial creditors, such as banks, have managed to recover Rs 47,768 crore, or

He said though the intention of the a little over 55 per cent of their claims, showed the data by insolvency regula-
regulator is correct, the one-day de- tor, compiled on the basis of the inputs provided by resolution professionals (RPs).
fault along with decisions like doing Operational creditors - including raw material suppliers - have received Rs 2,015
away with the joint lenders' forum crore, making up for 61 per cent of their claims. Financial creditors, expectedly,
should be re-considered. "The circu- made up for the bulk (96 per cent) of the total claims admitted by RPs.
lar is well meaning, but something's "The IBC is way better than the earlier system, where recovery used to take a
need to be relooked, such as the one lot of time, and wherever a one-time settlement took place, the amount was
day default (clause). Also, forums like usually not more than 20-30 per cent. Also, many stressed firms were allowed
JLF (joint lenders' forum) is still debt restructuring, which further worsened their state of health. In contrast,
needed, although RBI has done the IBC stipulates a time-bound resolution of default cases, which is good," said
away with it," Mundra told an indus- Manoj Kumar, partner and head (M&A and insolvency resolution services) at
try conference. consultancy Corporate Professionals Capital.

In a circular to banks released on Interestingly, in nine of these 32 cases, insolvency proceedings were triggered
February 12, RBI changed the frame- by the corporate debtors themselves, while 14 were by financial creditors and
nine by operational creditors. As many as 12 cases were handled by the NCLT's
work for bad loan resolution tighten-
ing disclosures by banks and Kolkata bench, and eight by the Mumbai bench.
funnelling all existing resolution State Bank of Mauritius to open six branches in India
mechanisms to the bankruptcy
State Bank of Mauritius, announced its expansion plan for India with six new
courts. Banks now have to disclose
branches by next year, after becoming the first
defaults even if interest repayments
foreign bank to get a wholly-owned subsidiary
are overdue by just one day and (WOS) licence.
frame a resolution plan within the
next 180 days. The lender, which received its WOS licence from
the Reserve Bank of India, is expected to oper-
If banks cannot resolve a case of a ate as a banking subsidiary of SBM Group in In-
default within 180 days, the corpo- dia under the name of SBM Bank (India) Ltd.
ration has to be resolved under bank- "This new structure will provide more leeway for SBM in its branch-expansion
ruptcy laws. But Mundra questioned
strategy," the bank said in a release. For its India operations, the lender plans
disproportionate noise made by the to set up six new branches in Delhi, Bengaluru, Kolkata, Pune, Ahmedabad and
power sector which has sought High Jaipur, and also tap the India Africa trade corridor. Established in 1994 in India,
Court's help to quash the order. SBM currently has four branches in the country.

8 | 2018 | SEPTEMBER | BANKING FINANCE