Sashakt Committee headed by Punjab National Bank non-executive Chairman Sunil Mehta has stated that the new guidelines of RBI regarding the mandation of Inter-Creditor Agreement (ICA) framework is a right move to resolve non-performing assets (NPAs or bad loans).
In the first week of June 2019, RBI has issued revised guidelines for resolution of stressed assets named “Prudential framework for resolution of stressed assets”, which has mandated the lenders to review the accounts within 30 days of default and initiate a resolution plan or Insolvency and Bankruptcy Code (IBC) process before the default, among others.
The mandation of ICA enables the lenders to have a resolution framework outside of the IBC (Insolvency and Bankruptcy Code, 2016).
Sashakt Committee :
In 2018, the government had constituted a committee led by Sunil Mehta to resolve NPAs. The committee had come out with ICA for Resolution of Stressed Assets and was executed by 35 banks and financial institutions.
Besides Mehta, the other members of the Sashakt Committee include State Bank of India (SBI) Chairman Rajnish Kumar, Bank of Baroda Chief Executive S. Jayakumar and SBI Deputy Managing Director Venkat Nageswar.
1. The panel has recommended that bad loans of up to Rs 50 crore will be managed at the bank level, with a deadline of 90 days.
2. For bad loans of Rs 50-500 crore, banks will enter into an ICA, authorising the lead bank to implement a resolution plan in 180 days, or refer the case to the National Company Law Tribunal (NCLT).
3. For loans above Rs 500 crore, the panel has recommended its resolution through an independent asset management company (AMC) supported by institutional funding through an Alternative Investment Fund (AIF).