Indian banks are bracing for significant financial losses after the Supreme Court struck down JSW Steel’s ₹19,700-crore resolution plan for Bhushan Power and Steel Ltd (BPSL), ordering its liquidation due to payment structure violations and implementation delays.
Impact on Banking Sector
The ruling has thrown one of India’s largest insolvency cases into turmoil, with banks collectively facing a ₹31,300 crore exposure to BPSL. Under the now-scrapped resolution plan, lenders were expecting recoveries of around ₹12,400 crore, but liquidation proceedings could significantly reduce these estimates.
Banks Most Affected
Among the worst-hit lenders, State Bank of India (SBI) has the largest exposure at ₹9,800 crore, with an earlier estimated recovery of ₹3,930 crore. Other affected banks include Punjab National Bank (PNB), Canara Bank, Union Bank, and Indian Bank, each facing unrealized recoveries ranging from ₹1,000 crore to ₹2,500 crore.
Why Was the Resolution Plan Rejected?
The Supreme Court ruled that JSW Steel’s resolution plan violated the Insolvency and Bankruptcy Code (IBC) by using a mix of equity and optionally convertible debentures (OCDs) instead of pure equity. Additionally, delays in implementation further undermined the plan’s legal standing.
What Lies Ahead?
With liquidation now the only viable path forward, banks are preparing for steeper haircuts on their dues. Experts suggest that alternate legal remedies or a fresh resolution proposal could still emerge, but until then, the fate of ₹31,000 crore in bank dues remains uncertain.
Stay tuned for further updates on this developing financial crisis.
