State Bank of India (SBI), the country's largest lender, on Monday said asset management companies (AMC) and alternate investment funds (AIF) can bid for stressed assets in the National Company Law Tribunal (NCLT).
In an interview to CNBC-TV18, Rajnish Kumar, chairman, said that banks will have one year for provisioning of accounts that go to NCLT.
Watch: Don't see any additional impact of Feb 12 circular on provisioning requirement, says SBI's Rajnish Kumar
Kumar said, "At SBI, we have given approval for four cases and are covering 2-3 cases this week. Board has already approved."
Edited excerpts: Q: Today is August 27 and Rs 2,000 crore plus stressed assets will have to go to National Company Law Tribunal (NCLT), can you just give us the numbers? We are told it's about 70 assets and about Rs 3.5 lakh crore. Are these numbers correct?
A: Before I come to the numbers, one is, I think there is lot of hype around today's date, August 27. So sometimes I wonder whether it's really warranted that kind of hype. It's not warranted in the sense that whatever be the number as far as the non-performing assets (NPA) of the banks is concerned or as far as the provisioning requirements on these NPAs is concerned, it has no impact whatsoever. So that is the first thing.
The framework of RBI's February 12th circular said that there is 180 days forbearance in which you decide what is to be done, and that is where August 27 is coming in. The reference to NCLT of many cases in fact has already happened. Nobody was waiting for August 27 to come and it's only after that reference to NCLT will happen.
There are a few cases and I am talking about, where State Bank of India is focused, that has been in the power sector. In power sector also, there are assets where power purchase agreements (PPAs) are available, may not be full 100 percent, but either partially or full. So, it was only these assets, where bank was focused that let us try to resolve them without referring to NCLT. The process adopted has been that it has to be again within the framework of RBI's February 12 guidelines.
So what the banks did, one, all the assets, the liquidation value has been determined, the sustainable debt has been determined by the two credit agencies which forms the basis of any price discovery. Price discovery has happened through a competitive bidding process. That is all what is done in the NCLT also. There are buyers at a particular price which is acceptable to most of the lenders. So what is now remaining is that lenders have to take their internal approvals.
Broadly, there is a consensus. In every case, there would be one or two dissenting voices, which can be always expected. But by and large, the approach which has been adopted to discover the price, the methodology adopted, that has been found to be acceptable by most of the lenders. At SBI, we have given approval for four cases, 2-3 cases we are covering this week. Board has already approved. These three are identical in approach, so there is no question of board having any dissenting or not approving that. So it's just a procedural matter, where all the banks are getting approval from their boards and signing the documents.
Q: The broad picture we were told that 70 assets above Rs 3.5 lakh crore. Not to create alarm, is that broadly the right number?
A: I do not have that information, because we are not present in all those 70 cases.
Q: 34 of them were power assets. That was in my calculation above Rs 1.8 lakh crore. Is that fair?
A: Within 34 cases, not everything is in NCLT. They were considered to be stressed at one point of time. But I think resolutions have already happened and implemented in eight. Some of the cases, I think 18 is the last count, they are already in NCLT.
Q: Out of the 34, 18 are already at the NCLT?
A: There may be 3-4 more. 18 cases are in NCLT right now and eight have already been resolved. 11 cases were identified for Samadhaan, out of which four have been found to be not viable and being referred to NCLT.
Q: So that leaves to 7?
A: That leaves to seven.
Q: Now in these 7 cases, we are talking about how much, Rs 70,000 crore?
A: My exposure is Rs 17,000 crore. If you multiply by four, maybe Rs 68,000-70,000 crore.
Q: Have the other banks signed up? Are you reasonably sure that you can take all the seven or should we work with say 50 percent will work?
A: We will try that, wherever there is a broad consensus, we will resolve all of them. If it does not happen, there is no concern about referring them to NCLT, because even NCLT and not-NCLT. Again this has to be understood in the context of what is the best resolution plan, which can minimise the losses to the banks. As I said, these assets, these power plants had Power purchase agreements (PPA), that is why they were selected, otherwise you can go to NCLT, it's perfectly alright.
Q: If you take away these four or even seven assets and suppose a large part were to go to NCLT, will there be an increase in provisioning because NCLT is backed up, even getting registration for the last 29 cases took almost eight months.
A: It works both ways.
Q: So will you have to do more provisioning in FY19?
A: That is what I am trying to explain. If I resolve, then I do the provisioning upfront. I cannot just spread it. If it does not get resolved, the lenders get one year almost to make the provision. So that way at times that is also the concern, maybe, not with all, not a lender like us where I am ready to take it upfront, but maybe there are some lenders who may feel that in NCLT, because they get some time to spread the provision and rather than doing it upfront so why not take it to NCLT. So provisioning is the least concern in the sense that even if it goes to NCLT, the provisioning will happen as per the AG. So, if an asset is today D2, it will become D3, so 100 percent provision.
Q: What is the progress on the asset management company (AMC) and the Alternate Investment Fund (AIF). Will there be bidders in any of these assets, these 70 of them?
A: No. Once the AMC and AIF comes in, there will be bidders in the NCLT process also. These 6-7, they are too advanced, so obviously they cannot be part of that. But if any of these cases get referred to NCLT, then AMC and AIF can look for assets in NCLT process also.
Q: Give me the approximate date of AMC, is it visible?
A: We are trying, it is visible.
Q: September is a possibility?
Q: One more asset I wanted to ask you as it's a large one, Reliance Infocomm. We just got a press release on the exchange that they have got Rs 3,000 crore for their fiber assets from Reliance Jio. Now, where does Reliance Infocomm fall? Even their deadline is August 27?
A: Individual cases you have to excuse me. You have to rely on what the company said.
Q: The doubt only was because for the Ericsson case they got time till September 30, but does the entire resolution go till September 30?
A: Once a client is in NCLT, it's in the NCLT. The only thing is that if a resolution professional (RP) is appointed, forget about Reliance Infocomm, in any cases, even if an operational creditor has taken any company to the NCLT, then it is a reference to NCLT. If there is an RP, then there are timelines in which financial creditors have to file their case.
Q: There there was no RP because they themselves went to an out of court….
A: If there is no RP and the matter is still in NCLT, and Supreme Court has stayed, so the apex court is supreme. So you abide that.
A: As I said, forget about the individual assets, but what I am saying is that if an asset has been refereed to NCLT by any of the operational creditors, not even financial creditors, then the process is that RP gets appointed. When RP gets appointed, financial creditors also have a say in that, committee of creditors is formed and banks. Even if we have not referred the matter to NCLT, we will be part of that process and we will file the claim. However, there are many cases even in NCLT 2, where courts have intervened and have put a stay on NCLT proceeding. So I cannot do anything about that as that is a subjudice matter and till such time, the High Court or Supreme Court wherever the matter is pending, they give a clear go ahead, in one of the cases Supreme Court said that now you have to go ahead with the NCLT process and so process has started. Till such time, Supreme Court has stayed that process, we could not do anything. So this is the story with whether it is Reliance Infocomm or whether it is JAL or whatever it is. So, if the matter is being handled by NCLAT, Supreme Court and High Court, then whatever is their order, that will precede over anything else. Once they give the order, then the process will resume.
Q: Would you say that asset can be resolved by September 30? That much time banks and the companies have? Is that a reasonable assumption?