The government may be forced to put its state-run bank consolidation push on the back burner since at least a dozen of them are staring at a big hole in the balance sheet this fiscal year after RBI told them to get cracking on resolving as many as 50 bad loan accounts or initiate bankruptcy proceedings against them by December end.
RBI said on Wednesday that banks will have to set aside 50 per cent of debt the moment a company is referred to the National Company Law Tribunal as part of the insolvency process. This will pinch the banks even more, with most having provided for 25-30 per cent only. In the event of a resolution, banks will typically need to take a haircut as well.
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