Crackdown On Bad Loans: RBI Directs Banks To Start Bankruptcy Proceedings Against 12 Defaulters 

The Reserve Bank of India (RBI) has started cracking the whip on bad loans, and to begin with, has directed lenders to start bankruptcy proceedings against 12 large corporate accounts that make up quarter of the overall gross non-performing assets (NPAs).

The central bank said the 12 accounts make up about 25 per cent of the overall NPAs, which accounts for over Rs 1.9 lakh crore. The RBI said on Tuesday that its independent advisory committee (IAC) has identified these accounts that will be referred to the Insolvency and Bankruptcy Board under the bankruptcy code. The IAC, according to a Hindustan Times report, zeroed in on the 12 by focusing on accounts owing more than Rs 50 billion ($777.2 million), where 60 per cent or more of the loan had been already classified as non-performing by banks as of 31 March 2016.

Those 12 accounts were identified based on “objective, non-discretionary criterion” outlined by the IAC, the RBI said. The RBI has offered the banks six months to come up with resolution plans for the other non-performing accounts that do not, at present, qualify under the criteria, failing which insolvency proceedings will have to be initiated against them too.

Indian banks are sitting on a stressed asset pile of close to Rs 10 lakh crore, of this gross bad loans account for Rs 7.7 lakh crore, the rest are restructured loans, said a Hindustan Times report. The RBI step comes about a month after the government empowered the RBI to deal with bad loans, including ordering banks to initiate insolvency proceedings in the case of a default under the bankruptcy code.