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Lenders want extension of insolvency deadline

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Lenders want extension of insolvency deadline
If debt resolution is not finalised by December 13 for the 28 companies, insolvency proceedings will kickoff
The Indian Chamber of Commerce (ICC) has written to RBI Governor Urjit Patel, requesting an extension of the deadline to March 31, 2018.
Since the IBC is a new code and there are more than 300 accounts under the IBC in the NCLT without a resolution so far, banks should get more time for debt resolution outside the IBC to avoid risks of liquidation and plant closure with consequent unemployment, according to the chamber.
“The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, has also been recently issued on November 23, 2017, which is likely to delay the resolution of exposures above Rs 5,000 crore already under the IBC till April 2018 and it would be prudent to refer further cases to NCLT only after there is clarity on resolution of the existing cases,” the ICC letter added.
Based on the recommendations of the Internal Advisory Committee, the RBI had recommended 12 large accounts for immediate resolution under the IBC. Currently, these accounts are going through insolvency.Companies on the second list said right now there was no benchmark for the lenders. “If the resolution of the 12 large accounts happened then, there would have been some kind of a direction for the smaller ones that are on the second list.
Most of the non-binding bids have been extended and may just happen in January so a complete resolution will take place only in end-March or April. So there is no reason why the deadline for NPAs with debt below Rs 5,000 crore can’t be extended,” said the promoter of one of the companies. The government has come up with an Ordinance that practically debars promoters from reacquiring their assets.
Also, with so many issues under litigation, including the Ordinance, lenders don’t want to move ahead without clarity and deal with these cases, the companies say. Lenders, in the mean time, are exploring options like onetime settlements or sale to asset reconstruction companies
“Once the cases are admitted to the NCLT, provisioning requirement will go up substantially,” the head of a public sector bank said. As of now, of the 30 companies, around 10 were prepared to submit resolution proposals, said sources close to the development.

The Business Standard, New Delhi, 11th December 2017

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