Mumbai, February 22: Despite all the negativity surrounding the banking sector post PNB scam, a silver lining is slowly emerging in the form of possible resolution of bad loan of Bhushan Steel and Power in coming days.
If the resolution process goes through, it will not only help banks to recover a part of their unpaid dues from Bhushan account, but will also help in clawing back provisions that has been set aside by banks after the account turned NPA.
“Resolution in Bhushan Steel will definitely improve sentiments in the banking industry which has taken a severe beating after the PNB scam. It will also prove the efficacy of the insolvency resolution process,” a banking source said.
Earlier, Bhushan Steel has informed the stock exchanges that the company has received resolution plans from Tata Steel, JSW and employees of Bhushan Steel.
According to reports, Tata Steel has emerged as the highest bidder for buying out the debt-laden steel firm. Tata has offered an upfront payment of Rs 35,000 crore to Bhushan’s financial creditors as per reports. Tata has also offered 12% stake in Bhushan to lenders as part of its buyout deal. Tata Steel’s offer is far higher than its nearest rival JSW Steel’s bid of Rs 29,700 crore.
According to analysts, the estimated haircut to banks in Bhushan Steel account is likely to be lower, which is a clear positive for the banking industry.
“Any resolution on Bhushan Steel account brings good news to the banking industry as we expect the final haircut to be lower than earlier anticipated number,” Group head- Financial sector ratings at rating agency ICRA, Karthik Srinivasan told The Finapolis.
He, however, said that the steel firm is one of the 12 accounts referred by the RBI for insolvency resolution. “This is just one account. What happens to other large accounts will determine the direction of resolution process,” Srinivasan added.
The Reserve Bank of India (RBI) last year had recommended 12 accounts totaling about 25% of the gross NPAs of the banking system for resolution under IBC.
Bhushan with a gross debt level of around Rs 40,000 crore was among the 12 large companies identified by the RBI for early insolvency resolution.