RBI Formed IAC identifies 12 accounts for immediate resolution under IBC

An internal advisory committee (IAC) formed by RBI had, on June 13, 2017, identified 12 accounts which cover about 25 per cent of the banking system’s bad loans, for immediate resolution under the Insolvency and Bankruptcy Code (IBC).

These accounts had been selected for referral by the IAC as their outstanding amount has exceeded about Rs 50 billion and among this 60 per cent had already been classified by banks as non-performing assets as of Mar 31,2016. However, the name of the borrowers has not been disclosed by the central bank.

Members of internal advisory committee, in their first meeting on Monday focused on the top 500 stressed accounts which were either partly or fully non-performing on the books of banks and that could be referred for resolution under IBC.

The RBI based on the recommendation of committee will issue the directions to all banks to file insolvency proceeding under IBC for the identified accounts by the panel and such cases will be handled by the National Company Law Tribunal (NCLT).

IAC said that beyond the 12 large bad loans, for rest of the stressed loans, banks should finalise resolution plan and file for insolvency proceedings under IBC within six months.  

This is the most significant step taken by the RBI, since the government of India empowered RBI to handle the issue of stressed assets. RBI has also taken a prompt corrective action against IDBI Bank, UCO Bank, and Dena Bank as they are the banks showing negative return on the assets and high net non-performing assets (NPA).