NEW DELHI: In order to fast-track the resolution of non-performing assets (NPA), bankers on Thursday finalised an inter-creditor agreement (ICA) framework that seeks effective communication among lenders. A part of Project Sashakt, the project will be taken to boards of respective banks and would be cleared in a couple of days, according to Punjab National Bank (PNB) non-executive chairman Sunil Mehta after the meeting.
Under project Sashakt, recommended by a committee led by Mehta, independent asset management companies (AMCs) and steering committees would be set up for faster resolution of bad loans in the banking system.
The new ICA mechanism is expected to be enforced within this month, it was decided at a meeting called by the Indian Banks Association and attended by Union Minister Piyush Goyal. The non-performing assets (NPAs) in the banking sector crossed `9 lakh crore at end-December 2017 and the RBI has warned of further worsening of the situation.
Speaking after the meeting, Mehta pointed out that the agreement is a participatory process. “The way we have constructed this is that as long as 66 per cent of the banks who have exposure, take the decision, then they will be able to take a deciding step forward with the majority supporting them,” Mehta said. It also makes sure that it is effective, good communication amongst banks and if anyone has a difference, then they will resolve it among themselves, he added.
According to bankers, the ICA is a framework under which a consortium of lenders would take up NPA cases. The framework will authorise the lead bank to implement a resolution plan in 180 days and the leader would then prepare a resolution plan including empanelling turnaround specialists and other industry experts for operation turnaround of the assets within RBI’s stipulated time-frame of 180 days. Mehta said banks of all sizes, including from the private sector participated in the meeting.
“They went through discussions and it was fruitful to conclude the inter-creditor agreement. It will go live this month,” Mehta said, adding that the inter-creditor agreement will a legal document and enforceable in any court of law. The inter-creditor agreement is a building block as “we implement various options” and “the way we had articulated project Sashakt, this is really for multi banking arrangement, that is the whole idea of having inter-creditor agreement,” Mehta pointed out.