Since the National Company Law Tribunal (NCLT) was set up 18 months ago, over 4,300 cases have been filed at its various benches for resolution process, according to the Reserve Bank data.
The insolvency and bankruptcy code came into existence with the enactment of the Insolvency and Bankruptcy Code (IBC) in May 2016, replacing the Company Law Board regime.
“As of November 2017, over 4,300 applications under the corporate insolvency resolution process (CIRP) were filed in the various benches of NCLT,” the RBI said in its Financial Stability Report (FSR) released over the weekend. “Of these, more than 500 applications seeking admission for insolvency proceedings were rejected, dismissed or withdrawn,” it added.
The report said around 470 cases admitted by the NCLT are at various stages of the insolvency process.
In June this year, the Reserve Bank had asked banks to refer the 12 largest dud accounts totalling about 25 per cent of the gross NPAs of the banking system or worth about Rs 2.5 trillion to the NCLT for resolution. And 11 of them are in NCLT now.
Later in August, the central bank gave the banks a list of another 28 more large accounts to be resolved by December 13, failing which those accounts would have to be referred to the NCLT by December 31. These accounts constitute another 15 per cent of the system-wide bad loans and of these banks have sent as many as 25 to the NCLT.
The bad loans in the system have crossed the Rs 10 lakh crore mark or 10.2 per cent as of the September quarter from 9.6 per cent a year earlier and the FSR warned that gross NPAs would spike further to 10.8 per cent by March 2018 and to over 11.1 per cent by September 2018. “The banking stability indicator shows that the risks remain at an elevated level weighed down by further asset quality deterioration,” warned the report.
Overall, the stressed assets, including restructured loans and dud loans increased to 12.2 per cent during the same period from 12.1 per cent. Gross dud loans at the state-run banks shot by 100 bps to 13.5 per cent while the same for their private sector peers jumped to 3.80 per cent.
under-reporting bad loans
Incidentally, the report said private sector lenders, considered more prudent are the ones reporting the most stress, reported a whopping 40.8 per cent spike in their GNPAs in the September quarter alone, as against 17 per cent by the state-run banks whose lazy banking has been blamed primarily for the mess in the system.
All the top private sector lenders, including ICICI Bank, Axis Bank and Yes Bank, and even HDFC Bank, have been found to have under-reported bad loans worth tens of thousands of crores in the recent RBI supervision, results of which were recognised over the first two quarters of the fiscal.
The report said so far in 25 CIRP transactions, NCLTs have approved the resolution plans or liquidation orders, whereas the admission of cases have been set aside by the orders of appellate authorities i.e. NCLAT or the Supreme Court in 25 CIRPs admitted by the adjudicating authority.