Promoters within their rights to bid own stressed assets, says State Bank of India

MUMBAI: In a relief to promoters of stressed companies facing insolvency proceedings, SBI Chairman Rajnish Kumar on Monday said that such firms were within their rights to bid for the troubled assets. Kumar’s observation comes amid reports stating that some lenders had raised objections in the recent past.

“Ethical... I don’t know, but legally they are within their rights to participate,” Kumar said adding that there was no concern about bidding by existing promoters as there are certain qualification criteria kept by lenders for them to bid.

“There will be a few preconditions from creditors. One is that they should not be wilful defaulters and the second is that a forensic audit should clear them of any wrong doings. The third is about the quality of resolution plan they submit,” he explained.

Speaking on the sidelines of the annual national banking summit organised by Ficci, Kumar said the effort to rope in a new promoter was to enhance the enterprise value of the stressed asset, and anybody who gives the maximum enterprise value, that is in the interest of the enterprise itself, will be accepted to lenders.

“We’ve already drawn the baseline under which there is no place for a wilful defaulter or people who have diverted funds, as proved by the forensic audit. But otherwise, if law permits that existing promoters to participate, then we can’t help it. It is very much there and we have to abide by the law,” Kumar explained.
In June, an RBI committee had asked lenders to refer 12 large stressed accounts to the National Company Law Tribunal (NCLT) for resolution under the bankruptcy code.

Kumar added, “The kind of expression of interest has been received in the steel sector is very good. But ultimately, how many bidders will remain and what resolution plan they will submit to the banks or the creditors, that is something which you have to wait for some time.”