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Banks can term IL&FS loans as NPAs, barred from recovery: NCLAT

Banks can term IL&FS loans as NPAs, barred from recovery: NCLAT

New Delhi, May 2 (IANS) The NCLAT on Thursday reversed its own interim order to allow lenders with exposure to IL&FS and its group companies to classify them as non-performing assets (NPAs), in line with RBI norms, but restrained them from moving to recover any dues from the beleagured group or group companies till their resolutions are undertaken.

In February, the National Company Law Appellate Tribunal (NCLAT) had passed an interim order restraining the lenders from classifying either IL&FS or its group companies as NPAs. Subsequently, the RBI had moved the NCLAT to reverse the interim order, citing the norms governing the classification of accounts as NPAs and arguing that these norms should not be interfered with.

 

The SBI has an exposure of Rs 10,000 crore and Allahabad Bank has an exposure of Rs 1,220 crore in the IL&FS group.

The NCLAT observed that a wrongful impression had been created that classification as NPAs would adversely affect the group companies in the resolution process, but the matter has now been clarified.

While allowing the banks to classify the loans as NPAs, the NCLAT has, however, reinforced the moratorium. It said that that even if the IL&FS group companies are held to be NPAs, the lenders cannot move to recover. It has directed the lenders not to withdraw support from the group companies until a resolution is found for IL&FS.

The next hearing in the case will take place on May 21.

A bench headed by Chairman, Justice S.J. Mukhopadhaya, lifted the embargo on the banks to declare the accounts of the debt-ridden IL&FS and its 300 group entities. Banks have an exposure of Rs 55,000 crore in IL&FS and its group companies.

The bench has said that lenders must not withdraw support until a resolution is found of the IL&FS and its group companies.

Presently, Infrastructure Leasing & Financial Services (IL&FS) Group companies, with a collective debt of over Rs 90,000 crore, are going through the resolution process.

The NCLAT had in February prohibited banks from recognising any IL&FS group accounts as non-performing assets without first seeking approval from the tribunal.

Now, all group companies of IL&FS are being classified according to their ability to meet payment obligations.

On the basis of their strength to meet interest payment obligations, those able to meet all payment obligations are categorised as 'green' while companies able to meet only operational payments and senior secured debt obligations are categorised as 'amber'. Others are categorised as 'red'.

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Banks can term IL&FS loans as NPAs, barred from recovery: NCLAT

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