Indian commercial banks will commence deliberations today on referring steel companies to the National Company Law Tribunal (NCLT), the first trigger after the Reserve Bank of India (RBI) named the steel companies facing bankruptcy proceedings, bank officials said on Monday, June 19.
Since debts extended to these steel companies and now categorized as non-performing assets, involve several lenders, all concerned banks will start meeting from Monday, June 19, to adopt a common administrative approach before referring the steel companies to the NCLT, the first requirement under the newly promulgated bankruptcy code, the officials said.
The RBI last week identified 12 defaulting borrowers of the banking system accounting for 25 percent of total bad loans of domestic commercial banks which included steel companies like Bhushan Steel Limited, Essar Steel, Bhushan Steel and Power and Monnet Ispat.
The central bank directed the commercial banks that these companies should be immediately referred for bankruptcy resolution under the Insolvency and Bankruptcy Code.
The officials said that banks are expected to finalize their common approach and complete the formal reference of defaulting steel companies to the NCLT before the end of the current month.
As per the new bankruptcy laws, a resolution plan for default has to be finalized within 180 days of reference to the NCLT, with a window for a 90-day extension and, if there is no resolution thereafter, the company will be forced into liquidation.