Stressed accounts on RBI list: Banks to set aside Rs 10,000 cr more

Banks would need to set aside an additional Rs 10,000 crore as provisions for accounts in the Reserve Bank of India’s (RBI) second list that are set to be referred to the National Company Law Tribunal (NCLT). However, these provisions are likely to spread over the December and March quarters, as the central bank has allowed banks time till the end of the financial year to provide for them. Two senior public sector bankers said that all but five of the 28 accounts in the second list would likely be referred to the NCLT in the absence of any resolution or requisite buyer interest.

The deadline to resolve the 28 stressed accounts ended on December 13 and banks now have another 18 days to take them to the bankruptcy court. Lenders said that apart from Videocon Industries, Jaiprakash Associates and Jayaswal Neco, a few other accounts might not go to the bankruptcy court.

Analysts said banks have provided between 40% and 45% for companies in the RBI’s second list. This means lenders will have to set aside another 5-10% for these accounts in order to comply with the RBI guideline to provide 50% of the total outstanding loans as provisions before referring an account to the NCLT.

Following the referral of 12 large accounts to the NCLT, banks have been asked to look for solutions for an additional 28 distressed companies. These 28 companies together owe banks a little over Rs 1.5 lakh crore.

According to Karthik Srinivasan, group head, financial sector ratings, Icra, banks could also look at frontloading the provisions instead of waiting for the last quarter. “Since most banks are expecting capital from the government and have also lined up share sale programmes to raise capital, they are willing to frontload the provisions,” he said.

For instance, Rajkiran Rai G, MD & CEO, Union Bank of India, had told reporters last month that the bank needs to make an additional provision of Rs 1,087 crore for 18 companies that are part of the RBI’s second list of defaulters. “The provision will come in the December and March quarters. This is going to hit us in the next two quarters. Instead of having losses at the end we have frontloaded,” he had said.

Bank of India CEO Dinabandhu Mohapatra had said last month that it has an exposure of Rs 3,300 crore in 16-17 accounts from the RBI’s second list. “We have more than 50% provisioning for these accounts,” he had said.

Other bankers FE spoke to said that although they have sought a deadline extension till March 2018 for a few accounts, the central bank has not yet replied. “If any fresh directive comes from the RBI by December 31, then we will implement it but there has been no communication from the central bank so far,” a senior public sector banker said.

In August, the RBI had sent lenders a second list of 28 stressed assets to be referred to the NCLT by December 31. The central bank allowed banks to make “adequate” provisions for such accounts by March 2018.

The new list, bankers said, includes Videocon Industries (gross debt of Rs 47,554 crore), IVRCL (Rs 3,579 crore), Uttam Galva Steels ( Rs 5,041 crore), Soma Enterprises (Rs 1,895 crore) and Asian Colour Coated Ispat (Rs 3,019 crore). The RBI had asked banks to try and come up with workable solutions for the stressed exposures by December 13.