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Bank-led resolution of NPAs set to begin

Indian Banks’ Association (IBA) along with former deputy governor of Reserve Bank of India has set up an oversight committee with to kick start bank-led resolution of stressed assets under the inter-creditor agreement. The association has now asked the 34 lenders to initiate and send the resolution proposals under the scheme.

According to the senior official of Indian Bank’s Association, banks have been told to provide forensic reports and credit rating of the borrower along with the resolution plan “Under Project Sashakt”, an overseeing committee (OC) is to be set up to look into these resolutions. The official said that the committee will consist of 5 members former RBI deputy governor HR Khan, former Canara Bank chairman MBN Rao, former SEBI chief M Damodaran and former State Bank of India chairman Janki Ballabh.

 

 Non Performing Assets| Banking News
Non Performing Assets| Banking News 

The former chairman of Punjab National Bank chairman said the official “It is very encouraging that the IBA has taken steps in the right direction and this will definitely help lenders use the bank-led resolution approach (BLRA) in addition to options available under the Bankruptcy Code”.

The committee led by 5 members had submitted a report to the government suggesting a five-pronged approach for resolution of loans which includes an inter-creditor agreement (ICA) to resolve in-house bad loans of Rs 50-500 crore.

The chairman of Indian banking Association said that About 34 banks have signed the Inter-Creditor Agreement (ICA) and under this agreement Non Performing assets of banks towards loans of up to Rs 500 crore would be around Rs 3.1 lakh crore. The banking official said that IBA will only collect the one-time non-refundable amount of Rs 7 lakh at the time of submission of each proposal to cover the expenses of the committee. The country’s top lender bank State Bank of India is expected to bring at least 10-15 cases for resolution under ICA.

The “Sashakt India Asset Management” has been registered as an Asset Management Company and the banks are talking with investors to set up an alternative investment fund (AIF) to fund the AMC.

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