Banks Forced to Put Non-Performing Assets for Sale

Banks are asked to put non-performing assets (NPAs) worth Rs.40,000 crore for sale in sectors such as roadways, telecom, and power. They were forced to put the NPAs for sale from the first half of the fiscal year to September due to the delays in the resolution process under the Insolvency and Bankruptcy Code (IBC). The IBC resolution timeline has been stalled by various stakeholders challenging the process in the court.

The Insolvency and Bankruptcy Board of India’s (IBBI) data shows that about 34% of the total 1,292 cases in the bankruptcy courts have been delayed beyond the scheduled 270 days as of June. About 26% of the cases were delayed a year ago and about 31% in the March quarter. The statistics have given rise to a fear of making the law ineffective; the previous endeavours add to the fear.

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Consequently, lenders are in search of asset-reconstruction companies (ARCs) to acquire NPAs. Simultaneously, they are also looking for National Company Law Tribunal (NCLT) and One-Time Settlement (OTS) for quicker recovery and resolution. In the cases where resolution is delayed, banks are opting for sale to ARCs.

In total, 11 private and state-run banks have put their NPAs for sale. Regarding the details, Bank of Baroda has put forth assets worth Rs.11,000 crore for sale. Similarly, IDBI Bank has put assets worth Rs.9,756 crore and Andhra Bank has put assets worth Rs.4,887 crore for sale.

To seek redressal, many litigators have also approached the Supreme Court.

For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in