By Sangita Mehta ET Bureau | Jun 22, 2017, 06.34 AM IST
MUMBAI: Banks led by State Bank of India will decide on Thursday the fate of three large defaulters — Essar SteelBSE 0.41 %, Bhushan SteelBSE 19.88 % and Electrosteel SteelsBSE 7.04 % — which constitute nearly half the loans of the top 12 defaulters identified by the Reserve Bank of India, thus marking a significant phase in the effort of lenders to clean up bad loans. These three borrowers have to repay loans worth over Rs 1 lakh crore, as the 12 accounts constitute 25%, or Rs 2.5 lakh crore, of the total bad loans in the banking system
The lenders and borrowers will meet on Thursday to discuss the possibility of the losses that banks would have to incur in reorganising these loans, and the amount of equity that promoters will have to bring in, said two bankers who did not want to be identified.
“The fate of the three large steel companies will be sealed soon. Lenders will seek mandate from the consortium to file for corporate insolvency,” said a SBI official who did not wish to be named. SBI, which is the lead bank for all the three steel companies, has called a meeting of the joint lenders forum (JLF).
Banks have outstanding loans worth Rs 45,000 crore to Essar Steel, Rs 47,000 crore to Bhushan Steel, and Rs 11,000 crore to Electrosteel Steels. On Wednesday, lenders decided to move an application to the National Company Law Tribunal (NCLT) to initiate corporate insolvency on ABG Shipyard, Alok Industries and Jyoti Structures.
SBI received a mandate from the lenders to file for insolvency for Alok Industries that has outstanding loans of Rs 22,000 crore and Jyoti Structures that has borrowed Rs 5,100 crore loans. ICICI Bank, which is the lead bank for ABG Shipyard, received a mandate from the consortium of 22 lenders to prepare a resolution plan on Rs 6,900 crore loans.
Since the beginning of this week, bankers are holding a series of meetings (among themselves) working out resolution plans after central bank ordered lenders to initiate insolvency proceedings on 12 accounts.
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