Bad Loans: Major Victory For RBI As Court Dismisses Essar Steel Plea

By dismissing a plea by Essar Steel against the Reserve Bank of India (RBI) today, the Gujarat High Court has fueled the government’s drive against corporate bad loans, said a report in The Economic Times.

The RBI had sent circulars to banks on 13 June to act against Essar Steel and 11 other firms which had outstanding loans of over Rs 5,000 crore each. Following this, the steel giant had moved court contending that the order was improper as it was in an advanced stage of loan restructuring and the court reserved its order for Monday (17 July).

The steel major had contended that it was doing well with an annual turnover of Rs 20,000 crore and hence should not be treated on a par with the other 11 firms that had shut down. But the court, which had earlier stayed the insolvency proceedings as an interim measure on its plea, dismissed the same today.

After the government empowered the Reserve Bank of India (RBI) last month to direct banks to take big defaulters to task under the Insolvency and Bankruptcy Code that specifies time-bound resolution, the central bank had identified 12 accounts that had over Rs 5,000 crore of outstanding loans, accounting for 25 per cent of total non-performing assets of banks.