RBI’s new framework to expedite resolution of stressed assets: Sashakt committee on bad loans

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New Delhi: The necessary norm of inter-creditor settlement permits banks to determine decision technique exterior the IBC and it’ll assist lenders to speed up course of to resolve pressured property, Sashakt committee on dangerous loans stated Monday.

“The requirement of entering into the Inter-Creditor Agreement is an endorsement by the RBI of the need for the lenders to have a framework for resolution outside IBC,” the committee headed by PNB non-executive Chairman Sunil Mehta stated in a launch.

The members of the panel that works towards quicker decision of pressured property in public sector banks embrace SBI Chairman Rajnish Kumar, Financial institution of Baroda MD & CEO P S Jayakumar and SBI Deputy Managing Director Venkat Nageswar.

The Reserve Financial institution on Friday had changed a troublesome norm on NPA categorisation by lenders, because it was quashed by the Supreme Courtroom in April, and offered banks further interval of 30 days to declare an account as dud.

 RBIs new framework to expedite resolution of stressed assets: Sashakt committee on bad loans

Representational picture. Reuters

The apex financial institution had issued a round in February for decision of dangerous loans below which a mortgage account may very well be categorised an non-performing asset (NPA) if it missed reimbursement for a day. Beneath this, the banks had been imagined to discover a decision inside 180 days or else the case be despatched to the chapter courts.

“The Sashakt Committee recommends the existing ICA agreement executed by 35 banks/FI’s under the aegis of Indian Banks’ Association (IBA) be adopted to incorporate the revised voting threshold / other changes for decision making stipulated by the RBI. It will enable expeditious implementation of the new framework,” the discharge stated.

“The new framework is pragmatic and a step in the right direction. It takes care of all stakeholders interests,” Mehta stated.

The SBI chairman stated the RBI’s new framework acknowledges the necessity for bank-led decision framework and in addition supplies regulatory sanction for it.

“This will expedite resolution of stressed assets given the revised voting thresholds and the requirement that all banks, NBFCs and ARC are mandated to join the ICA,” Kumar stated.

Financial institution of Baroda MD stated the brand new framework supplies flexibility to lenders to undertake any decision plan on a case particular foundation.

“The mandatory requirement for an Inter-Creditor Agreement will ensure that resolution efforts can be implemented by building adequate consensus as unanimity is hard to achieve and may not be timely,” stated L Viswanathan, Companion at regulation agency Cyril Amarchand Mangaldas who suggested the Sashakt Committee on the Inter-Creditor Settlement.

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