New Delhi: State Bank of India’s (SBI) decision to sell its Essar Steel debt does not “augur well” for public sector banks, a senior finance ministry official said. “Settlement outside the National Company Law Tribunal framework will definitely hit the recoveries by banks from the Essar Steel case. This does not augur well for the public sector banks,” the official said. On Wednesday, SBI had put Rs 15,400 crore of loans to Essar Steel on the block after protracted delay and lack of visibility surrounding its recovery.
SBI, which leads a consortium of lenders to the company, expects sale of the loans to fetch Rs 9,600 crore in cash, a discount of 18 per cent to the minimum recovery of over Rs 11,300 crore under a National Company Law Tribunal-approved resolution plan. The steel maker owes more than Rs 49,000 crore to over two dozen lenders.
The resolution through National Company Law Tribunals is taking too long, as many cases are stuck in the process due to some technicality or the other. Due to such dealy, banks may opt for settlement outisde NCLT to clean up their books,” the official said. Essar Steel was among the 12 large accounts that the Reserve Bank of India had directed banks to file a petition on with the NCLT under the bankruptcy code in June 2017.
Despite exceeding the maximum 270-day deadline prescribed for resolution of insolvency, the Essar Steel case has been stuck in a legal tussle among bidders and its promoter, the Ruia family. The finance ministry has set an ambitious recovery target of Rs 1.8 lakh crore by public sector banks in the current financial year ending March. In Apr-Sep, these banks have recovered Rs 60,726 crore. “We hope that the resolution process is expedited going ahead,” the officaial said.
