Banks to take a haircut for insolvency of non-performing assets

49 indebted firms have debt of Rs 2.8 lakh cr, backed by Rs 1.67 lakh cr of fixed assets

Banks may have to accept huge haircuts if they sell assets of financially stressed firms under insolvency provisions because a significant part of the loans on the books of the most indebted firms are not backed by tangible fixed assets. 

Many of these firms used only a part of bank loans to create assets, while the rest was used to fund working capital or cash losses, which cannot be recovered in a fire-sale of assets. In all, the debt exceeded fixed assets for 49 of the 85 most indebted firms in 2016-17. In 2015-16, 42 of the 67 most indebted firms