NCLAT allows banks to declare defaulting IL&FS accounts as NPAs
03 May 2019
The National Company Law Appellate Tribunal (NCLAT) has lifted a freeze on banks declaring defaulting accounts of debt-laden Infrastructure Leasing and Financial Services (IL&FS) and its group companies as non-performing assets, although the bar on recovery proceedings continues.
A bench headed by NCLAT chairman Justice SJ Mukhopadhaya on Thursday lifted the freeze on banks from declaring defaulting accounts of the company and its 300 entities as NPAs. However, the NCLAT said banks cannot initiate recovery process, debit money or withdraw support until a resolution is found.
The NCLAT move is in line with the requirement of banks declaring their bad loans or non-performing assets (NPA) in their accounts and financial statements. The Reserve Bank of India had also last week asked banks to declare details of their exposure and provisions related to IL&FS as part of their quarterly results.
The NCLAT had, on 25 February, issued an order directing financial institutions not to declare the accounts of IL&FS or its entities as NPAs without its prior permission.
RBI had last month sought modification of the NCLAT order, stating that banks should reflect IL&FS’ bad loans in their accounts.
Some of the banks have already made disclosures about their exposure to IL&FS accounts and also made provisions for them. IL&FS group has total debt of over Rs94,000 crore.
Under the new management, IL&FS Group firms have been categorised as green, red and amber based on their ability to pay.
The non-banking finance company of the IL&FS Group, IL&FS Financial Services (IFIN), reported a gross NPA ratio of 90 per cent as of 31 December 2018.