Indian Banks Risk Losing ₹19,000 Crore as SC Cancels JSW’s Bhushan Power Resolution: Report
In a significant development, the Supreme Court has cancelled JSW Steel’s ₹19,700-crore resolution plan for debt-laden Bhushan Power, leaving Indian banks, including SBI and PNB, at risk of losing a whopping ₹19,000 crore in recovery dues. This decision has sent shockwaves through the financial sector, with banks staring at a potential loss of ₹3.1 lakh crore in Bhushan Power’s liquidation.
Bhushan Power, once a prominent player in the power generation sector, was embroiled in a massive bank fraud case worth ₹47,204 crore. The company’s financial difficulties had led to a series of defaults, leaving banks with a combined loan exposure of ₹31,300 crore. As per reports, banks may only be able to recover around ₹12,400 crore from the liquidation process, leaving a significant gap of ₹19,000 crore.
The resolution plan proposed by JSW Steel, which was the highest bidder, was cancelled by the Supreme Court due to alleged irregularities. The court’s decision has sent a strong signal to banks and corporate entities that irregularities in the resolution process will not be tolerated.
The implications of this decision are far-reaching, and the impact on banks will be significant. Not only will they lose a substantial amount in recovery dues, but they will also face reputational damage and potentially, a decline in investor confidence.
The Bhushan Power case is a classic example of a corporate governance failure, where the company’s poor financial management and lack of transparency led to a massive fraud. The case highlights the need for stronger regulatory oversight and more stringent laws to prevent such frauds in the future.
The Supreme Court’s decision has also raised questions about the effectiveness of the Insolvency and Bankruptcy Code (IBC) in resolving corporate debt. While the IBC has been hailed as a game-changer in resolving corporate debt, the Bhushan Power case suggests that there are still significant challenges to be addressed.
The impact of the Bhushan Power liquidation on the power sector is also significant. The company’s power plants, which were once a major contributor to the national grid, will now be shut down, leading to a shortage of power in the region. This will have a cascading effect on industries and households, leading to increased costs and potential economic disruption.
In conclusion, the Supreme Court’s decision to cancel JSW Steel’s resolution plan for Bhushan Power has sent a strong message to banks and corporate entities. The loss of ₹19,000 crore in recovery dues will have a significant impact on banks, and the liquidation of Bhushan Power will have far-reaching consequences for the power sector. The case serves as a stark reminder of the need for stronger regulatory oversight and more stringent laws to prevent corporate fraud.
