State Bank of IndiaBSE -2.48 % has mandated bankruptcy specialist Alvarez & Marsal to act as interim resolution professional to reorganise Ruias-owned Essar Steel that defaulted on Rs 44,000 crore debt, said two people familiar with the development.

The nation's biggest lender has also hired Ernst & Young, Deloitte and PricewaterhouseCoopers to handle the insolvency proceedings for other companies, said these individuals, who sought anonymity.

Deloitte will help lenders reorganise Bhushan Steel while EY will administer the loan resolution process of Amtek AutoBSE -3.90 %. PwC has the mandate to resolve Electrosteel Steels, and consulting firm BDO India will manage Jyoti Structures.

The firms will be paid Rs 1.25-1.50 crore for a term of six to nine months depending on the size of the account and complexity involved, said the people cited above.

The bankruptcy proceedings in these cases follow a diktat from RBI aimed at recovering dues from 12 large defaulters. In a series of meetings last week, the consortium of lenders gave their consent to the lead banks to refer these 12 accounts to the National Company Law Tribunal.

During this week, banks will approach NCLT to initiate the resolution process where they will have to recommend interim insolvency professionals (IRPs) acceptable to all creditors.

Once the board of a defaulting company is dissolved, the IRP will look after day-to-day operations. As per procedure, a committee of creditors is to be formed within 30 days to decide whether the nominated IRP should be retained as the resolution professional (RP).

If the creditor and the borrower agree on the resolution plan within 270 days, the RP will hand over management to the promoters. But if the company goes for liquidation, the RP will have to oversee the liquidation of assets.

Others facing bankruptcy proceedings include Lanco Infratech, Bhushan Steel, Bhushan Power & Steel, Alok Industries, ABG Shipyard, Jyoti Structures, Era Infra, Jaypee Infratech and Monnet Ispat. They constitute 25%, or Rs 2.5 lakh crore, of total bad loans in the banking system.

Lenders are in a hurry to resolve big defaults, especially after RBI asked them to make higher provisions for loans to companies that have been referred to NCLT.

Once a company is referred to NCLT, banks have to provision for 50% of loan amount. But if assets are put up for liquidation, banks must provision for 100%.

Borrowers, too, are keen on a quick resolution because if lenders fail to decide on a loan recast within 270 days, the company would be put up for liquidation. This would lead to some promoters losing their crown jewels.