PSBs displeased as govt eyes IBC route for bankrupt PSUs

Lenders fear poor resolution at NCLT for long-struggling CPSEs with few buyers and complex stakeholder mix

- Subhash Narayan

Some of India's public sector banks (PSBs) are not in favour of the government now exploring the Insolvency and Bankruptcy Code route for stressed central government enterprises, fearing this would complicate debt resolution.

The proposal to explore the IBC route for stressed CPSEs was raised in meetings held by the Department of Public Enterprises with other government departments, including the Prime Minister's Office, according to a government official and bank executives Mint spoke with.

Executives at state-owned financial institutions said the government's backing and guarantees on Central Public Sector Enterprises (CPSE) borrowings and asset monetization help them settle claims smoothly, without having to write off large portions of debt.

If the government's proposal goes through, lenders fear stressed CPSEs may head to the National Company Law Tribunal (NCLT).