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The Indian banking sector faces fresh turmoil as the Supreme Court, on Friday, May 2, struck down JSW Steel’s ₹19,700-crore resolution plan for debt-laden Bhushan Power and Steel Ltd (BPSL), ordering its liquidation instead.
The SC ruling on JSW Steel's Bhushan Power deal has brought high uncertainty for creditors, especially public sector banks, which now risk losing substantial recoverable dues tied to one of India’s largest insolvency cases.
₹3.13-lakh crore in claims in limbo
Indian banks reportedly have a combined loan exposure of ₹3.13 lakh crore to BPSL. Of this, the likely recovery, as per earlier brokerage estimates, was pegged at around ₹1.22 lakh crore.
State Bank of India (SBI) had the highest claim at ₹9,800 crore, with a likely recovery of ₹3,930 crore, or 0.9% of its net worth. Punjab Bank (PNB) claimed ₹6,100 crore and expects ₹2,440 crore, or 1.94%. Canara Bank’s claim stood at ₹3,700 crore with a recovery estimate of ₹1,490 crore (1.52%).
Union Bank of India had a ₹3,200-crore claim and may recover ₹1,280 crore (1.15%). Indian Overseas Bank expects ₹420 crore from a ₹1,000 crore claim (1.44%), while Indian Bank may recover ₹1,060 crore from ₹2,600 crore (1.59%).
Axis Bank claimed ₹900 crore and expects ₹350 crore (0.2%). J&K Bank and Karur Vysya Bank had claims of ₹400 crore each, with expected recoveries of ₹170 crore (1.25%) and ₹140 crore (1.23%), respectively. IDBI Bank claimed ₹600 crore and may recover ₹230 crore (0.42%).
Here’s a breakdown of major banks and their claims
|
Bank |
Claim (₹ crore) |
Likely Recovery (₹ crore) |
Recovery as % of Net Worth |
| SBI | 9,800 | 3,930 | 0.9% |
| Bank of Baroda (merged) | 2,600 | 1,050 | 0.8% |
| PNB (merged) | 6,100 | 2,440 | 1.94% |
| Canara Bank (merged) | 3,700 | 1,490 | 1.52% |
| Union Bank of India (merged) | 3,200 | 1,280 | 1.15% |
| Indian Overseas Bank | 1,000 | 420 | 1.44% |
| Indian Bank | 2,600 | 1,060 | 1.59% |
| Axis Bank | 900 | 350 | 0.2% |
| J&K Bank | 400 | 170 | 1.25% |
| Karur Vysya Bank | 400 | 140 | 1.23% |
| IDBI Bank | 600 | 230 | 0.42% |
| Total | 31,300 | 12,400 | — |
Supreme Court verdict: A shock to recovery hopes
According to a
CNBC-TV18 report, the Supreme Court invalidated the resolution plan, citing two main violations:
Improper Payment Structure: JSW Steel used a mix of equity and optionally convertible debentures (OCDs) instead of pure equity, contrary to the Insolvency and Bankruptcy Code (IBC).
Delay in Implementation: The takeover wasn’t completed within the legally stipulated timeframe.
This has invalidated the earlier plan approved by Bhushan Power’s Committee of Creditors (CoC) and leaves liquidation as the only viable path forward for now.
A protracted legal battle
JSW Steel had initially acquired a 49% stake in BPSL in 2021 and raised it to 83.3% by October that year. However, legal troubles mounted after the Enforcement Directorate (ED) flagged BPSL in a massive ₹47,204-crore bank fraud and money laundering case.
Although the Delhi High Court quashed those proceedings earlier this year, today’s Supreme Court ruling nullifies JSW's acquisition and complicates the recovery process for lenders.
What does it mean for Indian banks with exposure to Bhushan Power
With liquidation likely to yield far less than the proposed resolution plan, public sector banks stand to lose a significant portion of their expected recovery.
Given the large exposure, it remains to be seen how much impact this will have on the balance sheets, and impact provisioning in upcoming quarters.
Experts, as per the CNBC-TV18 report, have suggested that alternate legal remedies or a fresh resolution plan may still emerge. However, until such a route is charted, the fate of over ₹3 lakh crore in recoverable bank dues hangs in the balance.
