Banks are racing against time to ensure that at least 15-16 of nearly 80 large borrowers are able to meet the Reserve Bank of India's (RBI) deadline for the resolution of big-ticket non-performing assets (NPA) that comes to an end today, multiple sources told CNBC-TV18.

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According to the central bank’s revised framework for the resolution of stressed assets, now popularly referred to as the February 12 circular, banks were given 180 days to resolve defaulting accounts of over Rs 2,000 crore.

The new rule mandates lenders to initiate insolvency resolution under the Bankruptcy Code, if a resolution plan is not approved even at the end of the 180 days of first default.

For the corporates, who were delayed in their repayment to lenders when the circular was issued, the 180-day deadline started on March 1 and will come to an end on August 27.

First the good news. Almost all the accounts impacted by RBI’s Feb 12 circular are already recognised as NPAs by banks. This means that banks have already taken a minimum 15-25 percent provision on these accounts and there is no large incremental hit that banks will have to take further. There are also several accounts that have already been referred to the National Company Law Tribunal (NCLT), or even been admitted.

"As far as the Feb 12 circular is concerned, provisioning will depend on level of security, ageing etc of these accounts. What could happen is, in case an account goes to NCLT, account by account provisioning may differ,” said Arjit Basu, managing director at State Bank of India.

The bad news, however, is that the problem of resolving these assets now moves from the banks to the courts, which are already choked with several unresolved cases.

Sources said that 7-8 power accounts have been identified where a resolution is possible outside the NCLT and another 6-7 non-power sector cases where a solution is being worked out to meet the deadline.

“Around 8 power assets are already working fine, some resolution has already happened. Around 7 are already admitted, 4 are already referred and another 4 that we have taken a call to refer to NCLT. Another 7 cases are where we are very close to resolution, where bankers have agreed and price discovery has already happened, so let’s see how soon they close,” said Basu.

According to sources, resolution plans for Coastal Energen, SKS Power Generation Chattisgarh and Prayagraj Power Generation Co have already been approved by the banks and those for Avantha Jhabua Power, JPVL, GMR Rajahmundry and KSK Mahanadi are in the process of receiving approval.

In the non-power sector, banks are hopeful of resolving Ballarpur Industries, Supreme Infra, Matix Fertilisers & Chemicals, Bombay Rayon, Hindustan National Glass & Ind, Surat Hazira outside the NCLT.

Several other accounts, where no resolution was found, will be referred to the NCLT for bankruptcy proceedings now.

According to Basu, “There are cases, which we are ourselves working on, and found that there are no resolution coming in, and found that taking them to NCLT is the best option. There are some cases we have already referred to NCLT, and others where we are in the process of taking them to NCLT.”

In the power sector, the cases that are likely to be sent to the NCLT includes Jindal India Thermal Power, Rattan India, Sai Wardha Power, Sravanthi Energy, Essar Gujarat and Lavasa Gujarat. The other accounts are namely Punj Lloyd, JBF Industries, Garden Silk Mills, Rohit Ferrotech, ISMT, Gitanjali Gems, Splendid Metal Products and BMM Ispat.

“The resolution plan as considered by the consortium of lenders is under approval with the lenders. The plan is in line with the circular issued by RBI dated 12 February and requisite compliance have been met. We are in advance stages of settlement process with a significant majority of lenders on board. The process took longer due to the delay in appointment of the official credit rating agency, over 100 days, which was a prerequisite for the banks to finalize a resolution process. Hence we are seeking an extension. The contours of the settlement are in final stages of negotiation with the lenders,” a Punj Lloyd spokesperson told CNBC-TV18.

Click here to read the finance ministry report on Power Sector NPAs and their current status.

There are certain cases where banks are unsure of what action would be taken. For instance, Reliance Communication is a large account that falls under the purview of the February 12 circular, but given that the case is already being heard in National Company Law Appellate Tribunal or NCLAT, banks are unlikely to take it to the NCLT until the matter is closed in a higher court.

Other accounts like Sterling Global Oil and Aban Holdings, which are also defaulters, may not be referred to the NCLT as these companies are not based in India and hence do not fall under the purview of the quasi-judicial body.

First Published:Aug 27, 2018 10:28 AM IST