Essar Steel: SBI welcomes SC judgement, may send more cases for review
Landmark judgement has paved a way for a faster resolution going forward, says SBI MD.
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The Supreme Court has ruled in favour of financial lenders in Essar case. You are one of the biggest lenders and the street is cheering the decision. How are you analysing the news we just broke moments back?
This is a landmark judgment which has come in today and it has restored faith in the banking system because the right of the financial creditor and October 23rd CoC’s decisions have been upheld. In many respects, it has paved a way for a faster resolution going forward. Also what has been mentioned is that in case, some infirmity is seen by NCLT, it cannot overrule the CoC’s decision. CoC will have to send it back which also means that CoC will be expected to behave very responsibly.
Supreme Court has also struck down the mandatory completion of the process in 330 days. It is a fair judgment by all reckoning but it has cheered up the financial community, the lender community in particular. I am sure it will go a long way in restoring faith of the lending community.
What is the significance of this for the overall system? Will this set a precedent for similar cases as well and will it move the ball faster for resolution of many other cases?
Absolutely. That is the very reason why I said that it is a landmark judgment. It has paved the way for a faster resolution going forward. CoC’s recommendations will be considered final and I am sure it will lead to faster resolution of such cases.
What does it mean for the SBI financials? How will it impact your numbers going forward?
Since we had already provided 100% for this particular asset, now we will be in a position to recover the dues. To that extent, it will improve our bottom line ad that is the kind of impact which we will get to see on the financial numbers.
What was the overall exposure here? Is it Rs 12,000 crore odd and when the write-back comes, will it be in a single quarter?
It was about Rs 12,000 crore. We will perhaps get something for the working capital too. But we have not yet worked out that number but yes, of course, that is how it is.
Since CoC’s recommendations will be considered final and I am sure it will lead to faster resolution of such cases.
-Dinesh Kumar Khara
In which quarter will that impact be actually taken?
As soon as we get the money.
You have similar exposure in many other cases, which are also there in NCLAT?
There are a few other cases also where NCLT had tinkered with the CoC’s recommendations. By virtue of this judgment, I am sure we will be in a position to go back and have the decision reviewed. That is something which we can proceed now. I am sure with this kind of a judgment from the Supreme Court, the movement will be much faster.
What percentage of your loan book is actually stuck in NCLT? How much of that have you already provided for? How much can be written back on your books?
When it comes to our overall provisioning coverage ratio, we are at about 81%. That is the kind of provision coverage ratio which we are having. In fact, we have provided much more than the average LGD in case of the NCLT cases. We are in the process of working out the different stages the various cases are in, That will give us a clear visibility. But if at all, resolutions start happening faster, I am sure it will be to a greater advantage to us since we have already provided for much more than the LGD for all the NCLT cases.