After the recent decision by RBI to initiate bankruptcy proceedings against 12 of the largest defaulters in the country, it is expected that banks will have to increase their provisioning for bad debts by a whopping 25 percent. This is unprecedented since the provisioning during the last fiscal was only 9 percent. Banks have made a collective list of the 50 top defaulters and out of the total loans outstanding against these entities, banks will have to mark 60 percent of these as bad debts. Due to this, banks have to increase their provisioning for bad debts by 25 percent this year.
The decision to refer the top 12 defaulters under the Insolvency and Bankruptcy Code 2016 (IBC) was taken by RBI based on recommendations provided by its internal advisory committee (IAC). It may be recalled that the IAC has mandated a time-bound resolution of these cases. The top 12 defaulters are Bhushan Steel (Rs 44,478 crore), Lanco Infra (Rs 44,365 crore), Essar Steel (Rs 37,284 crore), Bhushan Power (Rs 37248 crore), Alok Industries (Rs 22,075 crore), Amtek Auto (Rs 14,075 crore), Monnet Ispat (Rs 12,115 crore) Electrosteel Steels (Rs 10,274 crore), Era Infra (Rs 10,065 crore) Jypaee Infratech (Rs 9,635 crore), ABG Shipyard (Rs 6,953 crore) and Jyoti Structures (Rs 5,165 crore).