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Home News Power Sector News Punjab National Bank gets green signal to act against Bhushan Power

Punjab National Bank gets green signal to act against Bhushan Power

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PNBA consortium of lenders has given Punjab National Bank  the mandate to begin bankruptcy proceedings against Bhushan Power and Steel, one of the largest defaulters among the 12 companies identified by the Reserve Bank of India. The company, promoted by Sanjay Singhal, has outstanding loans of more than Rs 55,000 crore and is being investigated by the Serious Fraud Investigation Office (SFIO) for possible diversion of funds.

"Some of the large consultants made presentations to lenders for being selected as the interim resolution professional (IRP)," said a bank official present at the meeting.

"Subsequently, lenders discussed the various resolution plans." With this, lenders have given mandates to lead banks to initiate insolvency proceedings for all 12 companies referred by RBI on June 13.

Since the start of this week, lenders have held a series of meetings to decide on the fate of the dozen defaulters. The RBI ordered banks to refer these cases to the National Company Law Tribunal (NCLT) after the central bank was empowered to direct lenders to take action against defaulters.

These 12 companies owe a total Rs 2.5 lakh crore and constitute 25% of all bad loans in the banking system.

Lanco Infratech, Essar Steel, Bhushan Steel, Jaypee Infratech, Alok Industries and Amtek Auto are among the dozen.

"The easy part — getting the mandate from the consortium of banks — is over. The real challenge of designing the resolution plan, which will be acceptable to both the lender and the borrower, will start now," said another senior bank official. Over the next 15 days, lenders will file applications with the NCLT seeking approval to embark on the corporate insolvency process.

Lenders will be cautious in dealing with both the Bhushan companies considering that SFIO is investigating them.

On June 7, ET had reported that SFIO had written to banks seeking information about the loans extended to Bhushan Steel, and Bhushan Power and Steel while stating that they have "initiated investigation" into both. Banks have an exposure of Rs 47,000 crore to Neeraj Singhal-promoted Bhushan Steel. Lenders said moving NCLT will pave the way for the quick resolution of stressed loans as most promoters will be receptive to lenders demands for fear of losing control over their company.

The government and RBI have renewed the push to resolve the bad debt problem, seen as a key risk to India's economy. On Friday, the Securities and Exchange Board of India relaxed norms for investors seeking to acquire stressed assets, which is seen as aiding these efforts.

Source- ET

 

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