The Gujarat high court order is a big relief for public banks as it turned down the Essar steel’s bad loan plea. The court has reserved its order for monday on Essar steel’s plea against RBI.
The steel company approached the Gujarat high court when RBI issued a circular on june 13 to banks to act under Insolvency and Bankruptcy Code.
RBI asked the banks to take action against the company and the 11 other firms with over Rs.5,000 crore of outstanding loans each.
Bad loans is a very sensitive issue as many companies are misusing the insolvency factor and no particular action has been taken by the governments to act against them.
However, Essar had argued before the HC that it should not be treated on par with other eleven accounts (firms) which have been closed now, while Essar Steel is still doing well with an annual turnover of Rs 20,000 crore.
Indian banking system is overburdened by the bad loans as the have increased by more than Rs 1 lakh crore since April 2016 to Rs 6 lakh crore as of December 31. This goes up to Rs 10 lakh crore when those of private and other lenders are added on.