State Bank of India (SBI) Chairman Rajnish Kumar on Monday said the resolution of Essar Steel will boost profitability of the bank by about Rs 12,000 crore in the third quarter of the current financial year.
The country's largest bank, which was leading the consortium of lenders to Essar Steel, had an exposure of Rs 12,161 crore to the company. The bank has already made 100 per cent provisioning towards this.
So, recovery from the Essar Steel will be written back to its bottom line and will boost the profitability of the bank in the third quarter, he said.
The Supreme Court on November 15 set aside an NCLAT order which gave equal rights to the secured and unsecured creditors during the insolvency proceedings of debt-ridden Essar Steel, clearing the decks for its takeover by Lakshmi Mittal-led ArcelorMittal.
With the order, the apex court paved the way for ArcelorMittal's takeover of Essar Steel for Rs 42,000 crore.
The full money has come into an SBI escrow account and it is being distributed among the creditors, he said.
Kumar expressed hope that the last quarter too will be better as the money from the resolution of Alok Industries and Bhushan Power & Steel Ltd (BPSL) will flow in during January-March.
SBI has an exposure of Rs 4,000 crore to BPSL while Rs 1,700 crore to Alok Industries.
Besides, resolution of other stressed assets which are in the pipeline will have positive impact in the fourth quarter, he said.
"For MSMEs, I think the Insolvency and Bankruptcy Code (IBC) is not the right route. It is more for the bigger corporates. MSMEs should have a rehabilitation...we are not in favour to take them to the NCLT because it will burden the system unnecessarily," Kumar said.
He also said there will be money coming in from SBI Card stake dilution in the months to come.
Emphasising that the Supreme Court's verdict on Essar Steel is a landmark judgement, Kumar said it has settled every issue around the resolution under the IBC process and it is a huge positive for the economy.
The verdict came on a plea of the committee of creditors challenging the NCLAT's order of July 4 in which it had approved ArcelorMittal's bid for the acquisition of Essar Steel after it rejected a plea by the lead shareholder of the debt-laden firm challenging the eligibility of the bidder.
Essar Steel was auctioned under the new IBC to recover Rs 54,547 crore of dues of financial lenders and operational creditors.
On the loan growth, Kumar said, the bank has seen credit growth in the last three months and there is a huge amount of sanction for working capital and other area.
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