Indian banks are likely to recover Rs 70,000 crore ($9.95 billion) of bad loans by the end of March, helped by resolution of some big insolvency cases, finance minister Arun Jaitley said on Thursday.
Jaitley said in a blog post on Facebook that some of the 12 large cases that the Reserve Bank of India (RBI) had referred to bankruptcy courts in June 2017 are in advanced stages of resolution and are likely to be resolved in this financial year. These include Bhushan Power & Steel Ltd and Essar Steel India Ltd.
Lenders have so far recovered Rs 80,000 crore from the resolution of 66 cases, Jaitley wrote in the post, which marked two years of the Insolvency and Bankruptcy Code (IBC).
The RBI’s first list of 12 debt defaulters also included Bhushan Steel Ltd, Electrosteel Steels Ltd and Monnet Ispat & Energy Ltd. These three cases have been resolved, with Tata Steel Ltd buying Bhushan Steel, Vedanta Resources Ltd acquiring Electrosteel and a consortium of JSW Steel Ltd and private equity firm AION Capital snapping up Monnet Ispat.
In August 2017, the RBI sent a second list of about 28-30 cases to banks for resolution under the IBC.
Jaitley also said that the early harvest through the IBC process has been “extremely satisfactory” and that it has changed the debtor-creditor relationship with the creditor no longer chasing the debtor but the other way round.
Citing data from the National Company Law Tribunal, Jaitley said 1,322 cases have been admitted so far by the bankruptcy courts. As many as 4,452 cases have been disposed at the pre-admission stage and the amount settled was around Rs 2.02 trillion. He added that 260 companies have been sent for liquidation.
The IBC was approved by parliament in May 2016 and came into effect in December that year. The government has amended the code twice since then.
As per data from Insolvency and Bankruptcy Board of India (IBBI), the number of companies undergoing bankruptcy resolution had increased to 816 at the end of September 2018 from 445 at the end of December 2017.
The IBBI data also showed that the average recovery rate for the three quarters through September was 50.7%. This means creditors have been able to recover half the amount that was owed to them.
Lenders to the initial 12 companies in the RBI’s list are also estimated to have lost out on about Rs 4,000 crore in additional income due to delays in the resolution process beyond the 270-day period mandated under the IBC, ratings firm ICRA said in a November note.