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NPA resolution may get 180 days more

New Delhi: The government is considering a proposal to extend the time limit for bankruptcy resolution process by 180 days over and above the initial 180 days under the Insolvency and Bankruptcy Code (IBC). The Centre feels the current timeline is proving insufficient to arrive at a resolution.

The finance ministry is also suggesting that 75 per cent of bankers agreeing to a resolution — at present it is 100 per cent — is enough for passing the resolution in the committee of creditors (CoC). So, effectively the ministry is calling for a CoC voting cap.

The main purpose is quickening the process and go for the right kind of value creation. The changes being proposed will definitely help corporates, bankers and everybody else involved, said sources.

The current law allows a maximum 270 days for resolution — an initial 180 days and 90 days of extra time on top of that. Top finance ministry officials said this period might be further relaxed by 180 days. So, it will be 180 days for the resolution process and another 180 days to be awarded by the National Company Law Tribunal (NCLT) subject to the proceedings of the case. In short, if changes are incorporated, it will be a full year for any resolution of NPA.

Meanwhile, ministry of corporate affairs is reviewing the changes in the IBC. These new changes if incorporated will give NCLT the power to extend insolvency resolution by 180 more days. The finance ministry will send its proposals to MCA for incorporation after detail discussions.

Officials said after the Reserve Bank of India (RBI) scrapped many debt resolution mechanisms such as strategic debt resolution (SDR), corporate debt resolution (CDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A), there is stress on the NCLT and banks under the current timeline. The RBI said accounts with aggregate debt of more than Rs 2,000 crore will have to be taken to NCLT within 15 days if a resolution plan does not bear fruit in 180 days.
The RBI requires banks to implement a resolution plan within 180 days and in case of non-implementation, lenders are required to file an insolvency application. The RBI’s latest data shows that the public sector banks could recover a total of only Rs 15,786 crore in 2016-17 and 2017-18 till December 31 through all recovery channels, including IBC.

The total NPA of PSBs stands at Rs 8 lakh crore. The RBI has prepared three lists of defaulters who are in NCLT for resolutions. Not a single big case has been resolved so far.

In fact, in the last four fiscals — 2014-15, 2015-16, 2016-17 and 2017-18 till December 31 — all 21 public sector banks in aggregate could recover only Rs 29,343 crore out of Rs 2.72 lakh crore of bad loans, as per the RBI data.