NCLT Delays force 13 banks to auction off stressed corporate loans of Rs 33,949 cr to ARCs

Delays in resolutions at National Company Law Tribunals (NCLT) have forced 13 banks to auction off stressed corporate loans of Rs 33,949 crore to asset reconstruction companies or distressed funds with foreign funding. The non-performing assets (NPAs) have a carrying cost in the form of provisions (capital buffers) and tax implications, which the banks want to avoid.

This is the highest quantum of loans lenders have put out in the second quarter of the financial year. The momentum for the auctions, bankers said, is also because the government is pushing the banks, particularly the public sector ones, to clean up their balance-sheets. Large stressed corporate loans to telecom, steel and infrastructure companies are put on sale by the banks.

“We have selectively put up those accounts where it is time-consuming to resolve,” a senior banker said.

Major accounts in the auction include Rs 4,143 crore of loans extended to GTL Infrastructure, GTL Rs 2,874 crore, Wind World India Rs 2,940 crore, Orchid Pharma Rs 3,526 crore, Essar Steel Rs 1,978 crore, GMR Chhattisgarh Rs 941 crore and Alok Industries Rs 828.70 crore.

Many of these accounts including GTL, Binani Cement, Essar Steel are also in NCLT.

“These cases have got into litigations and are in various stages of resolution without a timeline, so we have decided to sell them off,” a banker said. “No one would like to wait for resolutions for too long as there is a carrying cost for the NPAs on our books.”

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Bank of India put the largest quantum of loans on the block. It has offered 47 accounts with loans of Rs 8,000 crore, State Bank of India has put 21 accounts with Rs 5,800 crore, Canara Bank 40 accounts with Rs 5,000 crore, Andhra Bank 53 accounts with Rs 1,553 crore. United Bank of India, which is under prompt corrective action, 26 accounts with Rs 1,107 crore while Indian Bank put 48 accounts with loans of Rs 953 crore.

Source: DNA Money