NPA recovery target in jeopardy on Essar Steel

By Anjana Das

The delay in actual realisation from the resolution of the big-ticket cases like Essar Steel has put the non-performing assets (NPAs), or bad loans, recovery target by banks of Rs 1.8 lakh crore in jeopardy.

A section of the Finance Ministry, however, believes the target of Rs 1.8 lakh crore could be deemed to have been achieved as the decision of National Company Law Tribunal (NCLT) on the sale of the Essar company to ArcelorMittal for Rs 42,000 crore was taken in the current fiscal.

A senior ministry source said the public sector banks (PSBs) have recovered close to Rs 1.33 lakh crore by the third week of March, leaving a gap of Rs 47,000 crore in meeting this year’s target.

The achievement of Rs 1.8 lakh crore mainly depended on the resolution of the Essar Steel insolvency case before March 31, which has happend, but the distribution of the funds to financial creditors has not taken place as operational creditors have taken up the issue of their dues in the appellate tribunal (NCLAT).

Earlier NCLAT had directed the Essar Steel Committee of Creditors (CoC) to reconsider the distribution of Rs 42,000 crore as announced by NCLT Ahmedabad, which had suggested a 85:15 distribution between the financial and operational creditors against the 90:10 ratio as proposed in the resolution plan.

The NCLAT was informed last week that a decision by CoC on the issue of whether StanChart, an unsecured financial creditor which had moved the NCLAT against the resolution distribution formulae, should get higher a payout for its dues from Essar Steel, is being discussed. The next hearing on the matter at NCLAT has been adjourned to April 9.

Unsecured lender Standard Chartered Bank, which had made the highest claim of Rs 3,400 crore, has been excluded from the offer. As per the plan submitted by ArcelorMittal, the bank will receive only 1.7 per cent, or Rs 60 crore, of its dues.

The total of claims admitted by the financial creditors in Essar Steel and Bhushan Power & Steel, the two big-ticket cases of the RBI’s first 12 list of NPAs, are Rs 49,479 crore and Rs 47,145 crore, respectively. (IANS)

Also Read: BUSINESS News