Home World Economy Don’t individually sell assets of cos under IBC: Finmin to PSBs

Don’t individually sell assets of cos under IBC: Finmin to PSBs

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NEW DELHI: Finance ministry has directed state-run lenders to restrain from individually inviting bids for selling assets of companies which are being dealt through the Bankruptcy Code.

A finance ministry official confirmed the development. This was done after some lenders had expressed concern that piecemeal sale of assets will bring other players in the committee of creditors, thereby diluting the say of public sector banks (PSBs) in the resolution process. “We have suggested to the lenders not to take individual decisions on such matters and co-ordinate amongst themselves so that both quick resolution and best valuation can be realised,” he said.

This comes after Union Bank of India and Bank of Baroda (BoB) had decided to sell their exposure in Bhushan Steel Ltd to Assets Care & Reconstruction Enterprise Ltd, an asset reconstruction firm. “Banks have already been directed to create Stressed Asset Management Vertical (SAMV), it is now expected that they should co-ordinate on such large accounts rather than take individual action,” the above quoted official said.

In January, the government had announced that it will give Rs 88,000 crore of capital to 20 staterun banks in the current fiscal. It had further noted that this infusion is contingent to performance of PSBs on the reforms undertaken, which will be evaluated by the respective bank boards. “Most lenders have identified their NPAs and the capital infusion package has been tailored after accounting for all such bad loans and their provisioning requirements,” the above quoted official said.

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Under the reforms agenda, PSBs need to set up specialised monitoring agencies for loans above Rs 250 crore and have a minimum 10% exposure in consortium loans to prevent a situation in which too many lenders are involved when it comes to debt resolution.

The Reserve Bank of India on Monday issued new directives for resolution of bad loans under which resolution plan needs to be completed within 180 days for loans above Rs 2,000 crore failing which lenders will file insolvency application, singly or jointly, under the Insolvency and Bankruptcy Code 2016 (IBC).

Besides further tightening of both reporting and resolution norms, the central bank also withdrew the existing schemes for resolution of stressed assets such as Framework for Revitalising Distressed Assets, Corporate Debt Restructuring Scheme.

“Defined timelines, subsuming all past schemes in the overall framework, and at same time providing banks flexibility to work out a realistic Resolution Plan is a great step,” said Manish Aggarwal, Partner and head Resolutions, special situations group, KPMG India.

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