Friday, May 14

United Bank of India exploring out of court settlement to expedite recovery

Kolkata: Peeved by the delay in corporate debt resolution in National Company Law Tribunals (NCLT), state-owned United Bank of India said it has been directly negotiating with borrowers to settle bad loans outside courts in cases where the bank is the sole lender.

UBI chief executive officer Ashok Kumar Pradhan said while price discovery remains a challenge in out of the court settlement, several banks are exploring this option to expedite recovery.

“Delay in corporate debt resolution is leading to higher losses,” Pradhan said Tuesday.

The bank has referred 33 medium sized accounts with to NCLT’s Kolkata bench and merely two has been admitted so far, the CEO said, adding that some cases were referred to sometime in second quarter last financial year.

The bank has recovered Rs 1227 crore from Bhushan Steel, Electrosteel Steels and Monnet Ispat as NCLTs approved their debt resolution but the insolvency resolution in several other cases has breached the 270 days deadline.

UBI’s stressed assets position improved in the fourth quarter with gross non-performing assets ratio dipping to 16.48% at the end of March from 24.10 a year back. Net NPA ratio improved to 8.67% from 16.49%. Its provision coverage improved to 72.94% as against 53.48% last year.

However, bad loan recovery in the sector through the bankruptcy resolution has been sluggish due despite the promise of time bound resolution as defaulters used every trick in their book to delay resolution. Banks could realise about 43% of the claims in 94 loan default cases that have been resolved in NCLTs since the corporate insolvency resolution process came into effect from December 2016.

About 1858 corporate debts have been admitted into NCLT at the end of March, 2019. Of these, 152 have been closed on appeal or review or settled, 91 have been withdrawn; 378 have ended in liquidation. Just about 94 cases have been resolved or 13% of the total cases admitted for resolution.

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