Indian banks need to set aside at least Rs 18,000 crore for the 12 accounts that the Reserve Bank of India said should be referred to the National Company Law Tribunal for insolvency and bankruptcy proceedings, said credit rating agency India Ratings in a release on Tuesday.

Banks must keep aside funds that amount to at least 50% of the bad loans of each company, India Ratings noted. At present, this ratio is around 42% on average across the sector. The credit ratings agency has predicted that the additional provisioning will eat into banks’ profits by around 25% in the 2018 financial year.

In the study, the 12 accounts identified by the RBI are broadly classified across five sectors, which have been further reclassified as iron and steel, infrastructure and others. For the iron and steel sector, an average of 45% of the amount of the bad loans has been set aside. In the infrastructure sector, this figure stands at 36%.

Out of the total Rs 18,000 crore required to be set aside, Rs 10,500 crore needs to be provisioned for the iron and steel sector, and Rs 4,100 crore for the infrastructure sector, the ratings company said.

Earlier, the central bank had stepped in to resolve the rising non-performing assets in the banking sector by referring 12 large accounts to the NCLT for starting the insolvency proceedings of 12 defaulting companies which make up about one-fourth of the total Rs 10 lakh crore worth of bad loans in the banking sector.

In its latest Financial Stability Report, the central bank expects bad loans to further go up by March 2018 if on ground conditions do not change. The agency’s analysis indicates that both small and large banks will want to capitalise their additional provisioning requirements.