Following the ordinance empowering RBI to lay down the process of initiating steps under the Insolvency and Bankruptcy Code (IBC), an Internal Advisory Committee (IAC) is set up by RBI to oversee the specific steps that are initiated by bankers for resolution of a bad debt. In its first meeting on June 12, 2017, the IAC agreed to focus on top 500 exposures in the banking system which were classified partly or wholly as non-performing assets.It is said that the IAC also arrived at an objective, non-discretionary criterion for referring accounts for resolution under IBC. As per the press release, the IAC would recommend for IBC reference all accounts with fund and non-fund based outstanding amount greater than ₹ 5000 crore, with 60% or more classified as non-performing by banks as of March 31, 2016. It is learned that 12 accounts totaling about 25 per cent of the current gross NPAs of the banking system would qualify for immediate reference under IBC.As regards to the other non-performing accounts which do not qualify under the above criteria, the IAC recommended that banks should finalise a resolution plan within six months. In cases where a viable resolution plan is not agreed upon within six months, banks were asked to file for insolvency proceedings under the IBC.The directons of RBI to file insolvency proceedings under the IBC will be based on the recommendations of the IAC. RBI press release also said that such cases filed by the banks will be accorded priority by the National Company Law Tribunal (NCLT).
It is estimated that nearly 80% of bad loans (NPAs) are loans above Rs.10 Crore mainly belonging to Steel, Road, Telecom, mines and minerals and SME sectors.